State of Alaska Comprehensive Annual Financial Report For the Fiscal Year July 1, 2018 - June 30, 2019 Prepared by: Department of Administration Division of Finance The FY 19 CAFR is expected to be available on or after February 26, 2020 on our Internet web site at http://doa.alaska.gov/dof/reports/cafr.html. This publication was released by the Department of Administration, Division of Finance to report on the State’s financial status. This publication is required by AS 37.05.210 This page intentionally left blank. STATE OF ALASKA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2019 TABLE OF CONTENTS Page Statement INTRODUCTORY SECTION Letter of Transmittal i Exhibits viii Organizational Chart xii Functions of State Departments xiii Alaska State Legislature xvi FINANCIAL SECTION 1 INDEPENDENT AUDITOR'S REPORT 3 MANAGEMENT'S DISCUSSION AND ANALYSIS 7 BASIC FINANCIAL STATEMENTS: 17 Government-wide Financial Statements Statement of Net Position 18 1.01 Statement of Activities 20 1.02 Fund Financial Statements Governmental Funds 23 Balance Sheet 24 1.11 Reconciliation of the Balance Sheet to the Statement of Net Position 25 1.12 Statement of Revenues, Expenditures, and Changes in Fund Balances 26 1.13 Reconciliation of the Change in Fund Balances to the Statement of Activities 27 1.14 Proprietary Funds 29 Statement of Net Position 30 1.21 Statement of Revenues, Expenses, and Changes in Fund Net Position 33 1.22 Statement of Cash Flows 34 1.23 Fiduciary Funds 37 Statement of Fiduciary Net Position 38 1.31 Statement of Changes in Fiduciary Net Position 39 1.32 Component Units 41 Statement of Net Position 42 1.41 Statement of Activities 44 1.42 Notes to the Basic Financial Statements 47 REQUIRED SUPPLEMENTARY INFORMATION: 163 Budgetary Comparison Schedule - General Fund 164 2.01 Note to Required Supplementary Information - Budgetary Reporting 165 Information about the State's Pension and Other Postemployment Benefit Plans 166 2.10 - 2.53 STATE OF ALASKA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2019 TABLE OF CONTENTS SUPPLEMENTARY INFORMATION COMBINING FUND STATEMENTS: 203 Governmental Funds General Fund 205 Combining Balance Sheet 211 3.01 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances 212 3.02 Nonmajor Governmental Funds 213 Combining Balance Sheet 214 3.11 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 215 3.12 Permanent Funds 217 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 218 3.23 Nonmajor Special Revenue Funds 219 Combining Balance Sheet 222 3.31 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 224 3.32 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 226 3.33 Nonmajor Debt Service Funds 233 Combining Balance Sheet 234 3.41 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 235 3.42 Nonmajor Capital Projects Funds 237 Combining Balance Sheet 238 3.51 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 239 3.52 Proprietary Funds Nonmajor Enterprise Funds 241 Combining Statement of Net Position 244 4.01 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 245 4.02 Combining Statement of Cash Flows 246 4.03 Commercial Assistance Enterprise Funds Combining Statement of Net Position 248 4.11 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 250 4.12 Combining Statement of Cash Flows 252 4.13 Energy Assistance Enterprise Funds Combining Statement of Net Position 254 4.21 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 255 4.22 Combining Statement of Cash Flows 257 4.23 Other Agencies Enterprise Funds Combining Statement of Net Position 258 4.31 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 260 4.32 Combining Statement of Cash Flows 262 4.33 Internal Service Funds 265 Combining Statement of Net Position 266 4.41 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 267 4.42 Combining Statement of Cash Flows 268 4.43 STATE OF ALASKA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2019 TABLE OF CONTENTS Fiduciary Funds 270 Pension and Other Employee Benefit Trust Funds Combining Statement of Fiduciary Net Position 272 5.01 Combining Statement of Changes in Fiduciary Net Position 274 5.02 Agency Funds Combining Statement of Fiduciary Assets and Liabilities 277 5.11 Combining Statement of Changes in Assets and Liabilities 278 5.12 Component Units Nonmajor Component Units 281 Combining Statement of Net Position 282 6.01 Combining Statement of Activities 284 6.02 Schedule STATISTICAL SECTION 287 Financial Trends Net Position by Component 291 A-1 Government-wide Expenses, Program Revenues, and Net (Expense) Revenue 292 A-2 Government-wide General Revenues and Other Changes in Net Position 294 A-3 Fund Balances, Govermental Funds 295 A-4 Changes in Fund Balances, Governmental Funds 296 A-5 Revenue Capacity Alaska Permanent Fund Investment Income 299 B-1 Oil Severance Taxes 300 B-2 Oil Royalties 302 B-3 Debt Capacity Ratios of Outstanding Debt by Type 304 C-1 Pledged-Revenue Coverage 305 C-2 Demographic and Economic Information Statistics 306 D-1 Employment by Industry 307 D-2 Operating Information Full-time Equivalent Government Employees by Function 309 E-1 Operating Indicators by Function 310 E-2 Capital Asset Statistics by Function 312 E-3 INDEX OF FUNDS 315 LEGEND OF ACRONYMS 321 This page intentionally left blank. February 26, 2020 The Honorable Michael J. Dunleavy, Governor Members of the Legislature Citizens of the State of Alaska In accordance with Alaska Statute (AS) 37.05.210, it is our pleasure to present the Comprehensive Annual Financial Report (CAFR) of the State of Alaska for the fiscal year ending June 30, 2019. This report has been prepared by the Department of Administration, Division of Finance. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the State. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and reported in a manner designed to present fairly the financial position and results of operations of the State. Statistical and demographic information are included to enable the reader to gain an understanding of the State's financial activities. INTRODUCTION Internal Controls The Department of Administration, Division of Finance, is primarily responsible for the overall operation of the State’s central accounting system. The State's system of internal controls over the accounting system has been designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived, and the evaluation of costs and benefits requires estimates and judgments by management. Some component units operate outside the State’s central accounting system. Those component units are responsible for establishing and maintaining their own separate internal control structures. Audits The Division of Legislative Audit is the principal auditor of the State’s reporting entity. The audit of the CAFR was conducted in accordance with generally accepted auditing standards (GAAS). The independent auditor’s report is the first item in the financial section of the CAFR and precedes the Management Discussion and Analysis (MD&A) and basic financial statements. The goal of the independent audit is to provide reasonable assurance that the financial statements of the State for the fiscal year ended i The Honorable Michael J. Dunleavy, Governor February 26, 2020 Members of the Legislature Citizens of the State of Alaska June 30, 2019, are free of material misstatement. The audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the CAFR, assessing the accounting principles used, and evaluating the overall financial statement presentation. In addition to the annual audit of the State’s CAFR, the State is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget’s Uniform Grant Guidance 2 CFR Part 200. Information related to this single audit, including a schedule of expenditures of federal awards, the auditor’s reports on internal controls and compliance with applicable laws and regulations, and a schedule of findings and questioned costs will be published at a later date under separate cover by the Division of Legislative Audit. Management’s Discussion and Analysis Governmental Accounting Standards Board Statement No. 34 requires that management provide a narrative introduction, overview, and analysis of the State’s financial activities. This transmittal letter is intended to complement the MD&A and should be read in conjunction with it. The MD&A can be found immediately following the independent auditor’s report. PROFILE OF THE STATE OF ALASKA The State of Alaska was the 49th state admitted into the Union in 1959. The Alaska Constitution was adopted by the Constitutional Convention February 5, 1956, ratified by the people of Alaska April 24, 1956, and became operative with the formal proclamation of statehood January 3, 1959. There are three branches of government: legislative, executive, and judicial. The legislative power of the State is vested in a legislature consisting of a Senate with a membership of 20 and a House of Representatives with a membership of 40. The executive power of the State is vested in the governor. The judicial power of the State is vested in a supreme court, a superior court, and the courts established by the legislature.