Author: alaskaadmin

The Senate Finance Committee on Wednesday proposed an operating budget for the next fiscal year, with a $1,000 Alaska Permanent Fund dividend plus $150 energy relief payment per eligible Alaskan. 

The committee’s draft budget takes a more conservative approach to uncertainty around the state’s revenue forecast for next year — driven by rising oil prices due to the Iran war – than the proposed budget passed by the Alaska House passed earlier this month, and eliminates the deficit.

State forecasters have projected a $500 million boost in state revenues, and senators have expressed caution around state spending and a willingness to focus funds to tackle aging infrastructure and deferred maintenance, particularly upgrading school facilities. 

“The most fundamental thing we have to remember is that the state doesn’t have the resources to do all the things we need to do and that Alaskans need us to do,” said Sen. Jesse Kiehl, D-Juneau, a member of the finance committee on Thursday. He said the greatest challenge for the Legislature is prioritizing. 

“And so I think we did that effectively,” Kiehl said. “I think it makes a few really crucial, really targeted investments.”

The Senate’s draft budget removed the House’s proposed $158 million one-time education funding boost, and instead appropriates up to $100 million for K-12 schools subject to oil revenues averaging $95 per barrel for the rest of this fiscal year ending on June 30.

Alaska has no personal income or state sales tax, and so roughly 60% of state funds for the general purpose budget comes from the Alaska Permanent Fund, the state’s sovereign wealth fund currently valued at $86.3 billion, and roughly 30% comes from state oil revenues. 

The draft Senate operating budget is based on an average of $73 per barrel for the next fiscal year starting in July, whereas the House draft budget is based on an average $75 per barrel projection. 

The draft budget contains some changes to the House version and additions across departments. It would double funding for disaster relief to $48 million, and increase fire suppression funding from $47.5 million to nearly $61 million. It funds an additional $29 million for school districts and $20 million for communities to offset rising fuel and energy costs; $30 million for community assistance programs; $5.3 million toward a renewable energy fund; $3.5 million for the Alaska Marine Highway system’s ferry maintenance and staff salary increases. It also boosts funds for public employees retirement from $75 million to $106 million, and increases funds for teachers’ retirement system from $157 million to $164 million, among others. 

The budget also contains $650,000 for a state audit of the Alaska Department of Corrections to evaluate cost drivers, as the department’s budget has ballooned in recent years.

Kiehl said while he’d like to see more investment in services like in the state’s foster care system, homelessness programs, energy and schools, he said the state can’t bank on unknown revenues.

“We have to be careful not to treat a temporary boost in the price of oil, which will probably last more than a year as though it were permanent, increase. That’s not responsible,” he said.

Senate Minority Leader Sen. Mike Cronk, R-Tok and a member of the finance committee, said he’d like to see a more conservative budget, but he also wants to avoid a large supplemental budget as seen this year. He said he supports the budget based on an average $73 per barrel estimate. 

“I’m pretty comfortable with that number. I just don’t want to be back in that same position as we have this year, where we are $500 million upside down for supplemental,” he said.

Cronk said he supports targeted funding for renewable energy projects, education and deferred maintenance for schools, rather than expanding state department budgets. “I just think we should focus on making sure we have a fiscally responsible budget all around and not adding money to programs that continue in future budgets.”

The budget also includes a number of supplemental items, or costs incurred this year outside the budget. Those include $5.2 million for Alaska Pioneer Homes, $1.25 million for Village Public Safety Officer operations, $1.5 million for the Department of Law’s criminal division, $543,000 for court settlements and $4 million to defend a lawsuit challenging the state’s health care system for inmates in the corrections system. 

Cronk said while he would like to see a maximum Permanent Fund dividend, it’s not possible within the state’s current financial picture. 

“The whole PFD issue is very controversial, no matter which way we go on it,” he said. “We should be paying a full PFD, but the budget, the numbers, don’t allow that right now.”

The Senate’s draft budget overall cuts nearly $450 million from the operating budget, compared to the House draft version. However, the Senate’s proposal leaves $50 million of headroom for additional expenses next year, but that’s after accounting for a $360 million capital budget for state infrastructure projects. The Senate passed a nearly $250 million capital budget on Tuesday, which is now being debated in the House where likely additional projects will be added. 

The proposed budget, unveiled as amendments to House Bill 263 will continue to be debated in the Senate Finance Committee and further amendments are due by Friday, before going before the full Senate for a vote.