Alaska Senate advances budget as governor signals support for $175M one-time boost for schools

JUNEAU — The Alaska Senate on Wednesday passed its version of the operating budget, as Gov. Mike Dunleavy signaled support for a $175 million one-time boost included for school funding.

The House and Senate’s spending plans have been similar, and were largely unchanged from the status quo budget proposed by Dunleavy in December. The dividend has again been the largest point of difference. In the final two weeks of the legislative session, the bigger fights between lawmakers are expected to be on major policy items, such as energy, education, criminal justice reform and election measures.

House and Senate leaders are set to start meeting next week to negotiate differences between the two legislative chambers’ budgets. That way, the same budget bill can pass through both chambers and onto the governor’s desk.

Both the House and Senate included $175 million in their budgets in extra one-time funding for schools, meaning that funding will not be the subject of further budget negotiations. The one-time funding equates to a $680 boost to the Base Student Allocation, the state’s per-student funding formula — but only for one year.

Last year, the Legislature approved the same one-time school funding increase, which was then halved by Dunleavy’s veto pen. At a news conference Wednesday, Dunleavy signaled that he would support $175 million in extra school funding included in a final budget passed by the Legislature this year.

“I’ve told people I’m open to an increase in one-time funding, especially to help with inflationary issues,” he said.

With public schools said to be in crisis from years of flat funding and high inflation, lawmakers included a permanent $680 boost to the BSA in a bipartisan education bill that Dunleavy vetoed in March. The governor said he could not support the measure because it would not expand charter school access. Alternative education bills have been proposed, but lawmakers’ hopes that one could pass this year have faded.

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After an almost three-hour floor session, the Senate’s budget passed Wednesday on a 17-3 vote. All of the no votes were from the three Republican senators who are not members of the bipartisan Senate majority.

Sitka Republican Sen. Bert Stedman, co-chair of the Senate Finance Committee, urged support for the operating budget. He said it would fund essential services while providing a “handsome dividend” for Alaskans.

”We’re living within our means. This is what it looks like,” Stedman said on the floor before the final vote.

The Senate’s budget for the fiscal year that starts in July is roughly $6 million in deficit, which Stedman referred to as “decimal dust” that would be resolved through negotiations with the House. For the current fiscal year, the Senate’s spending plan leaves a roughly $100 million surplus. That could be spent before July or it would lapse into the state’s main savings account.

The Senate’s budget includes $7.5 million for the child care sector, which is intended to boost wages, and $10 million for the Alaska Seafood Marketing Institute to help sell Alaska seafood in challenging market conditions. The Senate also included $1.3 million to help pay for snowplowing in Southcentral Alaska.

Since 2017, the Legislature has calculated the size of the dividend through the annual budget-making process, instead of using a set formula.

In December, Dunleavy proposed a budget with a roughly $3,400 Permanent Fund dividend, using the 1982 statutory formula. The governor’s dividend was projected to leave the state roughly $1 billion in deficit, requiring a substantial draw from the state’s main $2.5 billion savings account. There has been little appetite in the Legislature, and the Senate in particular, to draw from savings to balance the budget.

The Senate’s $1,360 PFD follows the 75-25 formula. Three-quarters of an annual draw from the Permanent Fund would go to state services, and the rest would go to the dividend. An extra $220 was added as an energy relief payment to create the Senate’s roughly $1,600 check for eligible Alaskans.

Last month, the House passed its version of the operating budget with a $2,300 payment to Alaskans that aimed to create a dividend following the 50-50 model. The House’s budget was projected to leave the state roughly $270 million in deficit.

Republican minority senators spoke in support of matching the House’s dividend. Sen. Mike Shower, a Wasilla Republican, said a larger dividend now would kick-start discussions in the Legislature to implement a comprehensive fiscal plan — potentially including a new PFD formula, taxes and a tighter legislative spending cap.

Sen. Robb Myers, a North Pole Republican, spoke in opposition to the budget. He said a bigger dividend should be part of a fiscal plan, and that it would show Alaskans that “the private sector is more important than the public sector.”

The amendment to boost the Senate’s dividend, proposed by Shower, was solidly rejected. Anchorage Democratic Sen. Bill Wielechowski, a longtime supporter of a full statutory dividend, said he wanted to approve a larger PFD, but it was not affordable.

“I unfortunately cannot support this because it endangers future dividends,” he said.

A provision in the Senate’s budget could boost the dividend next year. If oil revenue exceeds expectations, some additional revenue would be set aside for dividends next year and some would go to savings. A similar provision was added to the Senate’s budget last year, helping to increase the proposed 2024 dividend by over $200.

Another Senate provision would deposit up to $2 billion from the spendable part of the Permanent Fund to the constitutionally protected part of the fund. The provision was intended for inflation-proofing, but those funds could not be spent without a majority vote by Alaskans.

Myers proposed an amendment to block that transfer that was rejected along caucus lines. He said if there was an economic downturn, and the spendable part of the Permanent Fund was drawn down, that there could be serious consequences for state services and the dividend.

“We’re going to be in a world of hurt, real fast,” he said.

Minority senators introduced or prepared 21 amendments. All 21 were rejected by the majority.

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The Senate’s budget now advances back to the House. If a majority of House members reject the Senate’s changes to the budget, the planned conference committee would then start its work. If a majority of the House votes in support of the Senate’s budget, it would then be sent directly to the governor for his consideration.

Following an agreement between legislative leaders, the House is set to pass the capital budget by May 9. That budget is used to fund infrastructure and maintenance projects across Alaska. The Senate passed a capital budget last month with an emphasis on school maintenance and housing.