Category: Juneau Local

By: Corinne Smith and James Brooks, Alaska Beacon

A potential $500 million windfall is giving the Alaska House of Representatives a headache. 

On Friday, the Alaska Department of Revenue released a forecast predicting that the state of Alaska will collect hundreds of millions of dollars more oil revenue by June 30 than previously expected.

That forecast landed in the middle of an ongoing debate over whether or not to spend from savings to cover almost $530 million in extra expenses, largely added by Gov. Mike Dunleavy, to the state budget since last spring.

The Senate approved a proposal to pay for roughly three-quarters of those expenses and it is now in the state House, awaiting a vote that could come as soon as Monday. 

Tensions rose on Friday, with no agreement among House lawmakers on how to pay for the proposal. 

The House is led by a 21-person multipartisan coalition whose members have been urging fast action on the issue. They say it is particularly important to fund $70 million for the state’s transportation projects to unlock more than $630 million in additional federal funding.

Without sure money, majority lawmakers say projects can’t go out to bid and construction firms can’t make purchasing and hiring decisions. 

The construction industry has been lobbying heavily on the issue since before the legislative session began.

The majority wants to use the state’s Constitutional Budget Reserve, a savings account, to provide guaranteed funding.

The majority can pass a bill on its own, but it can’t spend from savings on its own. It takes 30 members of the House and 15 from the Senate to approve spending from the Constitutional Budget Reserve, the state’s principal savings account. 

The Senate has already given that approval, but in the House, at least nine members of the 19-person, all-Republican House minority would have to support the majority, and so far, they’re not willing to do that.

Part of that reluctance is because as currently written, the supplemental budget bill allows lawmakers to spend up to $373.6 million from the reserve regardless of whether or not the war-caused bonus becomes real.

If oil prices stay high and the reserve money isn’t needed, the majority could spend it on other things without further input from the minority. That’s because it takes only 21 votes to advance a budget bill.

In a Saturday post to Substack, Rep. Kevin McCabe, R-Big Lake, expressed worries about that prospect.

The money would return to the reserve only if it was unspent at the end of the fiscal year.

If lawmakers don’t spend from savings and the Iran war ends unexpectedly quickly, causing oil prices to fall, the minority could vote to spend from savings later to fill the gap. 

The result is an ironic set of circumstances — Trump has said that the war will be short, but minority House Republicans’ action is effectively a bet on a long war.

Minority members say they’re being fiscally responsible. So do members of the majority, who add that there’s an opportunity cost for any delay — Alaska construction companies can’t make plans for the summer until they know what projects they’ll need to build.

Majority members also expressed frustration that the supplemental budget was largely requested by the governor, who they say has been absent in negotiations.

In addition, legislators and Gov. Dunleavy could also find themselves with a problem if oil prices fall after legislators have adjourned for the summer.

Legislators typically write budgets based on forecasts from the Department of Revenue, but this year’s forecast is especially uncertain, the department said.

Rep. Calvin Schrage, D-Anchorage, co-chair of the House Finance Committee and a member of the majority, said he’s skeptical of banking on the forecast.

“I have a lot of concern over budgeting based on that forecast, because that’s all it is. It’s a forecast. It’s not realized money, it’s not money in hand,” he said Friday. 

“Even with this optimistic forecast, you are just barely, maybe able to balance the budget — if everything goes perfect. We still don’t have additional supplementals,” he said, referring to more budget amendments that could be requested by the governor.

Schrage said lawmakers will be scrutinizing the forecast in the coming days and weeks, and he said there’s still the possibility the Legislature may need to draw from savings.

But minority Republicans said they considered drawing from savings fiscally irresponsible.

“Taking a draw from our savings account to put into the general fund to fund things that were, by all accounts and purposes, able to be funded without it would have been irresponsible,” said Rep. Justin Ruffridge, R-Soldotna, on Friday. 

House Minority Leader DeLena Johnson, R-Anchorage, said she’s confident in the forecast projections. “There’s some actuals there too. So I’m very comfortable with actuals, and I also know, if there’s changes, we can come in and we can come in and make them, and make a different vote. I’m not as worried about that.”

Speaker of the House Bryce Edgmon, I-Dillingham, expressed frustration at the delay.

“This is pure politics. We should have had the supplemental budget funded. A long time ago,” he said. “The House Majority coalition prioritized the funding of the entire package that was proposed by the governor. Every single item came from the governor. And so here we are, you know, in a really precarious state, because we’re at the point where every week that goes by gets us a week closer to that federal match not being achieved for the summer construction season.”

Edgmon and other majority legislators have voiced frustration about “moving goal posts” on the budget bill. While there are more than $530 million in proposed additions, the bill in front of House lawmakers contains only three-quarters of that amount because majority members wanted to attract members of the minority for the savings vote.

The remainder will still have to be addressed later, regardless of what happens in the upcoming vote.

Edgmon said it’s not clear to him what the Republican minority wants in exchange for a budget reserve vote.

“We don’t know what the ask is,” he said. “But it’s all about leverage, and unfortunately, it’s falling on the shoulders of a lot of smaller contractors around the state.”

As of Friday afternoon, it appeared as if the budget bill was on course to pass, but without approval to spend from savings. 

If that occurs, the state of Alaska will be in the awkward position of hoping for a war long and difficult enough to keep oil prices high for months.

By: James Brooks, Alaska Beacon

The Alaska Senate voted unanimously Wednesday to spend more than $300 million from savings and reverse some of Gov. Mike Dunleavy’s most recent budget vetoes.

In a pair of 20-0 votes, the Senate approved a bill that would spend $373.5 million from the Constitutional Budget Reserve to pay for a variety of expenses and fill a deficit in the current budget year. 

“This is money to fund the budget that was passed last year for things that the governor already spent on,” said Sen. Bill Wielechowski, D-Anchorage.

The bill now goes to the House, which failed last month to approve the needed spending from the budget reserve.

Among the expenses in the new supplemental budget bill is $70.2 million needed to unlock federal transportation grants. Dunleavy vetoed that funding last year amid a dispute with the Legislature about the proper source of the money. 

Also in the bill is $98.7 million for the state’s wildfire response fund and up to $75 million for the disaster relief fund. That latter figure is dependent upon negotiations with the federal government about who will pay for the response after ex-Typhoon Halong devastated southwest Alaska last year.

The largest single item in the bill is $129.6 million needed to refill the state’s higher education investment fund, which was used to cover expenses due to a separate veto-involved dispute between the Legislature and governor.

That fund covers scholarships paid to Alaska high school students who meet academic standards and attend in-state schools.

The Senate-passed bill is significantly smaller than a $531 million version that had been previously considered. It shrank at the urging of the Senate’s six-person, all-Republican minority caucus.

It takes three-quarters of the House and three-quarters of the Senate — 30 Representatives and 15 senators, respectively — to spend from the budget reserve. 

That’s a high hurdle, particularly because the Senate’s bipartisan majority caucus has just 14 members and the House’s multipartisan majority has just 21 members.

In both cases, compromises with the all-Republican House and Senate majorities are needed to spend from the reserve.

On Monday, the Senate pulled the supplemental budget bill from its schedule with no advance notice. Sen. Lyman Hoffman, D-Bethel, said at the time that the Senate Majority had unexpectedly lost a minority vote it needed to spend from the reserve.

That spurred hours of closed-doors negotiations between the Senate minority and members of the majority.

Since the United States and Israel started bombing Iran on Feb. 28, the price of oil — and, in turn, Alaska’s potential oil revenue — has risen, giving legislators another way to erase a looming deficit.

“We went over and talked with (the Senate Finance Committee) co-chairs and just said, ‘Hey, obviously, the price of oil is changing,’” said Senate Minority Leader Mike Cronk, R-Tok. 

At the minority’s urging, the co-chairs removed almost $150 million from the bill — extra spending for state prisons, money for Medicaid, and millions in backup “headroom” for unforeseen expenses, among other items.

Cronk said the items removed during the compromise discussions could come back later, in the state’s regular budget bill, and the goal was to create “a real supplemental fast track” bill.

According to figures provided by staff for Hoffman, if Alaska North Slope oil prices average roughly $75 per barrel between now and June 30, the end of the state’s fiscal year, the state will earn enough oil revenue to pay for the removed items without spending from savings.

Since the start of the legislative session, construction companies have been lobbying for quick passage of a supplemental budget bill because they fear losing hundreds of millions of dollars’ worth of federally funded construction projects scheduled to take place as soon as this summer. 

The Alaska Department of Transportation and Public Facilities has disputed the need for early funding, and on Wednesday, Sen. George Rauscher, R-Sutton, attempted to strike that item from the supplemental budget.

He withdrew his proposed amendment after encountering opposition, saying he was satisfied with the smaller bill on the floor.

“We’ve come down a long way from $500 million,” he said.

After the Senate voted on Wednesday morning, members of the House majority attempted to call a vote to confirm the Senate’s changes. 

Members of the House minority objected, and the vote is now scheduled later, at 2:30 p.m. Thursday.

House Minority Leader DeLena Johnson, R-Palmer, said members of the minority wanted to wait until Friday, when a new state revenue forecast is expected.

“We’re talking about a $300 million draw. We may not need to take that full amount out of savings when we have money coming in,” she said, referring to the way the price of oil has surged during the Iran war.

Asked whether the new, lower draw from the reserve is more acceptable to members of the minority, Johnson said she wasn’t sure yet.

“There’s probably a number that’s better than others, but I mean, as low as possible is our number,” she said.