By: Corinne Smith, Alaska Beacon
The Alaska House of Representatives advanced a draft budget for the state’s operations next year, with a $1,500 Permanent Fund dividend for eligible Alaskans. It includes a nearly $158 million one-time funding boost for public schools and tens of millions for disaster relief, transportation and public assistance programs.
Members passed House Bill 263, the operating budget bill, along caucus lines by a 21 to 19 vote on Tuesday.
Lawmakers spent four days debating amendments — additions, cuts and reallocations to the draft budget — on the House floor, amid deep political divides around state priorities, war-driven oil revenues and how to balance paying for government services versus distributing cash to Alaskans through the dividend.
The draft budget now moves to the Senate for consideration, where it’s likely to be further revised.
“I feel relieved,” said Rep. Andy Josephson, D-Anchorage and co-chair of the House Finance Committee that drafted the budget, after the vote on Monday.
“But the difficulty we’re in is that overall, the war in Iran, which is most unfortunate, is very helpful to budgeting,” he said. “But the Alaska people are hurting more, right, particularly when it comes to fuel prices. So that’s a problem as well.”
As Alaska has no personal income tax or state sales tax, more than 60% of funds for the general purpose budget comes from an annual draw from the Alaska Permanent Fund and roughly 30% comes from state oil revenues.
Lawmakers have been closely watching Alaska oil prices, as they surged in recent weeks due to the Trump administration’s war on Iran. State forecasters project a potential $500 million boost in state revenues next year, but lawmakers are divided on what that should mean for state spending.
The all-Republican House minority caucus advocated for putting money towards a statutory Permanent Fund dividend, but the multipartisan majority coalition pushed the balance towards spending on state services.
The House draft operating budget made revisions to Gov. Mike Dunleavy’s proposed $7.75 billion budget unveiled in December, which included a $3,800 Permanent Fund dividend and a $1.8 billion draw from state savings.
The House draft opted not to tap into the state savings account. The House draft does include a deficit of roughly $180 million, but that total may change depending on revisions in the Senate.
Fairbanks Republican Will Stapp criticized the deficit as an “unfunded” budget. “It’s underwater,” he said Monday.
The draft budget contains increased funding across divisions: nearly $158 million in a one-time funding increase for public education, including nearly $11 million earmarked for student transportation; $33.3 million for Medicaid rate increases; nearly $55 million for fire suppression and $38 million for disaster relief; $17.5 million in heating assistance; $23 million for Alaska Department of Corrections staffing and tens of millions in transportation, public assistance programs like child care, infant learning programs, senior services, public health and public safety grants, among others.
House lawmakers rejected a roughly $3,800 Permanent Fund dividend proposed by the House Finance committee, which would have cost nearly $2.5 billion and was contingent on a draw from state savings, which requires approval of three-quarters of lawmakers.
House lawmakers instead approved a $1,500 Permanent Fund dividend that will cost the state $992 million.
Members of the multi-partisan House majority caucus expressed support for the draft budget that focused on public programs and services to enhance future benefits.
“Education, child care, parents-as-teachers, Head Start — moving upstream to try and give our youngest, our most precious resource in the state of Alaska, the best start that we can give them,” said Rep. Calvin Schrage, I-Anchorage, acknowledging that it is a balancing act for lawmakers.
Republican minority legislators also proposed spending increases, which included $2 million for the Alaska Department of Public Safety to establish a new Trooper post in Talkeetna, and $2 million for a sport fish hatchery in Fairbanks. Both failed along caucus lines by a 21 to 19 vote.
Minority Leader Rep. DeLena Johnson, R-Palmer, criticized the House draft budget in a statement following its initial approval on Monday.
“The budget passed by the Majority is a betrayal of the Alaskans we were sent here to represent,” said Johnson. “While Alaskans face one of the most unaffordable years of their lifetimes, this Majority has chosen to fund government agencies at record levels, while leaving families and communities behind.”
Minority lawmakers introduced nearly 50 amendments on the House floor over three days, which varied from cutting additional funding for education, funds for teacher recruitment and for community and regional jails, to cutting travel budgets and reallocating public employee salaries for vacant positions to add funding for school maintenance. Most of them failed along caucus lines.
The minority’s most strident call was for a maximum Permanent fund dividend.
“The removal of the statutory dividend that equates to removing $42.5 million dollars from the economy of my district,” said Rep. Sara Vance, R-Homer.
While lawmakers refer to the statutory dividend of roughly $3,800 per Alaskan, in 2017 the Alaska Supreme Court ruled lawmakers may ignore the formula since it’s not in the state Constitution. Since then, legislators have typically reduced the dividend to balance state expenses and avoid drawing from savings.
Boost to education funding
The House draft adds $158 million in one-time funding for Alaska schools, equivalent to an additional $630 per student.
That’s in the case that various education bills that provide a sustained increase to per student funding, through state’s formula boosting the base student allocation, fail to pass this year. Those bills are currently under consideration in education committees.
Lawmakers said they decided on the additional $630 per student after assessing the current deficits of the five largest school districts by student population. Many districts are grappling with decisions on school closures, staff cuts and increasing class sizes to address large budget shortfalls this month — including the potential closure of three schools in Anchorage, three schools in the Matanuska Susitna Borough, four schools on the Kenai Peninsula and two of the four elementary schools in Ketchikan.
Josephson said one-time funding this year for schools seems to be more viable than an attempt to permanently raise the per student funding formula, given the governor’s history of vetoing education funding increases — including three vetoes last year alone, one which the Legislature overrode in a special session last August.
“It’s far from a panacea, right? It’s far from anything that is the real solution. But I think if superintendents had it, they’d be delighted to have it,” he said.
Members of the House approved an amendment to earmark $10.9 million of that $158 million for school districts’ transportation for students, to help offset rising costs due to a war-driven rise in fuel prices.
Representatives from Northwest and Western Alaska objected to the transportation earmark, saying they were unsure if the funding would be allowed for student flights in their rural districts, which are off the road system. Rep. Jeremy Bynum, R-Ketchikan, sponsored the amendment, and said all districts would be eligible for their transportation of students, whether by road, air or ferry. It was approved by a 33 to 7 vote.
Lawmakers also debated earmarking an additional $10 million from the remaining one-time education funding for career and technical education grants for school districts, but the proposal narrowly failed by a 20 to 20 vote.
With a little over a month left in the legislative session, the House draft budget now goes to the Senate for consideration and likely further revisions.
On Monday, the Senate Finance Committee introduced a draft capital budget, a proposed $247 million for state facilities maintenance and construction projects, including for deferred maintenance of schools. The draft will go to the House for consideration in the coming weeks.
The legislative session is set to conclude on May 20.
Correction: A previous version of this story incorrectly stated the governor’s budget proposal, it was $7.75 billion not million.
