By: James Brooks, Alaska Beacon
Alaska lawmakers opened the second year of their regular legislative session on Tuesday with an ambitious agenda but low expectations amid a tight budget that appears likely to draw the lion’s share of legislators’ attention.
“It’s one big log jam,” said Sen. Bert Stedman, R-Sitka.
The Alaska Legislature operates on a two-year cycle between elections; bills are carried over from the first year to the second, but if they don’t pass the Legislature by the end of the second year, they expire and must start all over again.
Speaking Tuesday, members of the coalitions in charge of the House and Senate said they hope to address pensions for public employees, the proposed trans-Alaska natural gas pipeline, a long-term plan to balance state expenses and revenue, elections legislation and a handful of other major topics — all while dealing with an annual state budget that’s tightly constrained by the price of oil and a reluctance to enact legislation that will raise revenue.
On top of that, there are two newly appointed members of the state House, two members of the House who switched to the Senate, and new leaders in both the House and Senate’s minority caucuses.
The regular session is scheduled to end May 20.
Topic No. 1 is the state’s annual budgetary balancing act
“I think the big topic always is the budget,” said Speaker of the House Bryce Edgmon, I-Dillingham.
In December, Alaska Gov. Mike Dunleavy proposed a $7.75 billion state budget for the fiscal year that starts July 1 plus additional spending in the current fiscal year.
Alaska lacks the revenue to pay for that spending, so the governor has proposed spending $1.8 billion from savings.
Sen. Lyman Hoffman, D-Bethel and co-chair of the Senate Finance Committee, noted that the governor’s budget proposal calls for a large Permanent Fund dividend.
Reduce the governor’s proposal to $1,000 per recipient, and the deficit disappears — but only if you don’t include additional expenses that the governor left out of his budget, Hoffman said.
The Legislature could use savings to balance the budget, but members of the Senate majority believe the state’s Constitutional Budget Reserve — the state’s primary savings account — shouldn’t be used for recurring expenses.
“I’ve said it a couple of times, we shouldn’t be spending those dollars on one-time items,” Hoffman said.
If that position holds, the governor’s budget will need to undergo major changes before becoming final.
It takes 45 votes — 30 in the House and 15 in the Senate — in the 60-person Legislature to spend from the Constitutional Budget Reserve.
Getting those votes has historically been a challenge because it will require members of the majority caucuses to compromise with members of the minority caucuses.
In prior years, the Legislature has deadlocked over the issue, driving the state to the brink of a government shutdown.
“The budget is in an environment that’s fiscally constrained, and it’s going to be challenged by additional expenses that we’re going to see in the supplemental measure. That’s our top priority,” Edgmon said.
Governor’s veto of transportation projects looms large
One of the “additional expenses” that has legislators worried the most is funding for the state’s annual transportation construction budget.
Last year, Dunleavy vetoed a chunk of that budget because lawmakers intended to pay for it by diverting money from previously funded projects. Legislators did not take up a veto override during their August special session.
That’s left a hole of about $70 million needed to unlock ten times that amount of federal money.
Filling the hole will likely require spending from the Constitutional Budget Reserve, which needs a supermajority in the House and Senate.
“There are businesses that are going to close if the next construction year is not funded, and so I’m pretty concerned about it,” said Sen. Cathy Giessel, R-Anchorage.
Stedman called it a “significant issue.”
“We do have a deficit in this current fiscal year, and it is very difficult to deal with the three-quarter vote. … So we’ll wait and see what the governor’s proposal is to fix the mess he created,” Stedman said.
More than 20 groups representing a variety of organizations across the state have been urging lawmakers to act on the issue, going so far as to launch a statewide ad campaign that asks Alaskans to also join the lobbying effort.
Without quick action, the groups say, there will not be enough time to put money to work during the summer construction season.
Governor expected to reveal fiscal plan during State of the State
Shortly after opening their session on Tuesday, lawmakers formally invited Dunleavy to deliver his annual State of the State address at 7 p.m. Thursday.
That’s unusually early, but Dunleavy is expected to use the speech — his final State of the State before leaving office in December — to unveil a comprehensive plan to bring state expenses and revenue into alignment over the long term.
That’s likely to require significant new taxes or major budget cuts: A 10-year plan published by the governor’s office in December showed that the state will need to raise as much as $1.6 billion in additional money per year to keep state services at current levels in 2035.
Since oil prices plunged in 2015, state legislators and governors have been unable to fully resolve a fiscal gap that has bedeviled the state.
“It’s something that’s been on the docket for a long time, but it comes with a certain level of controversy, angst and maybe outright resistance,” Edgmon said.
Senate President Gary Stevens, R-Kodiak, said lawmakers initially expected the governor to propose a handful of bills, “but now there’s going to be an omnibus bill that has all of the issues in it,” he said.
House and Senate leaders were briefed on the outline of the governor’s plan earlier this week without receiving details.
Stevens, Edgmon and other legislators reserved comment on the governor’s ideas until they see the full text.
“It’s impossible to opine on it at this point without seeing the bills, without seeing what he’s truly putting forward,” Edgmon said.
Veto override vote possible on Thursday
Hours before the governor talks about a comprehensive fiscal plan, legislators will vote on an incremental bill that would provide funding for education programs across the state.
The House and Senate passed Senate Bill 113 last year but Dunleavy vetoed it. If lawmakers override the governor, online companies would be required to pay corporate income taxes in Alaska for services delivered in Alaska.
Current law allows them to pay those taxes at the site of their server farms or other physical offices.
“I think Senate Bill 113, quite frankly, is a litmus test for where we’re going to go with the fiscal plan,” Edgmon said.
Pension bill awaits attention in the Senate
On Friday, the Senate Labor and Commerce Committee will begin hearing a bill that would re-establish a pension plan for state employees and teachers.
The House passed the bill last year, leaving the issue in the hands of the Senate, which passed a similar bill in 2024. While Dunleavy has previously voiced opposition to the idea of a pension revival, a narrow majority of legislators appear favorable to the idea, saying it is important for Alaska to offer competitive benefits when hiring prospective workers.
New legislators and legislators take their seats
Last year, Sens. Mike Shower, R-Wasilla, and Shelley Hughes, R-Palmer, resigned from the Legislature to cover statewide office. Dunleavy appointed Reps. George Rauscher, R-Sutton, and Cathy Tilton, R-Wasilla, to fill those Senate seats.
Rauscher and Tilton sat as senators for the first time on Tuesday, while their replacements sat as representatives for the first time in the House — longtime legislative aide Steve St. Clair and Sutton Community Council member Garret Nelson.
Both are stalwart Republicans and aren’t expected to significantly change the mix in the state House, where they will sit in the 19-member, all-Republican House Minority caucus.
The House is controlled by a 21-person coalition of Democrats, independents and two Republicans.
The House’s Republican minority has a new leader this year — Rep. DeLena Johnson, R-Palmer, who replaced Rep. Mia Costello, R-Anchorage, during the legislative interim. Johnson gave up her position on the powerful House Finance Committee — a hurdle for any bill with a price tag — in order to take her role as the face of the minority.
Replacing Johnson on the finance committee is Rep. Elexie Moore, R-Wasilla.
Some members of the House minority were unhappy with Johnson’s election as leader in part because that vote took place before St. Clair and Nelson were appointed. Since then, Johnson has been confirmed with a second vote, and any division among members of the House has quieted.
In the Senate, Shower’s departure required the selection of a new leader for the six-person, all-Republican minority caucus there. Sen. Mike Cronk, R-Tok, was elected to that role by his fellow minority Republicans.
The Senate continues to be led by a 14-person coalition that includes nine Democrats and five Republicans.
Legislators prepare to take up natural gas pipeline issues
The proposed trans-Alaska natural gas pipeline will be the top priority of the Senate Resources Committee, Giessel said on Tuesday.
Developers of that project have said they intend to make a go/no-go decision on the pipeline’s first phase early this year, and Dunleavy has floated the idea of a large state property tax break in order to encourage the project.
On Tuesday, members of the Legislative Budget and Audit Committee voted to spend up to $250,000 to hire Pegasus Global to advise the Legislature on the pipeline project. The Legislature already has an advisory firm, GaffneyCline, on contract, but that firm’s parent company, Baker Hughes, plans to get involved with the pipeline project.
