Alaska Senate narrowly passes budget but fails to fully fund Permanent Fund dividend and other items

JUNEAU — The Alaska Senate narrowly passed a state budget on Wednesday, likely averting a July 1 government shutdown. But the Senate failed to fully fund that budget, an act that will leave this year’s Permanent Fund dividend at about $525 per person and leave several state programs unfunded.

The state House passed the budget Tuesday night and also failed to fully fund it. But both halves of the Legislature have passed the budget and are sending it to Gov. Mike Dunleavy, who may sign it or veto parts — or all — of it.

The state’s fiscal year starts July 1, and a budget is needed before that date to keep services functioning.

After the vote, Senate President Peter Micciche, R-Soldotna, said lawmakers will fix the partially funded budget later this year and seek to permanently change the dividend formula to resolve the perennial arguments over the amount of the payment.

Senate Minority Leader Tom Begich, D-Anchorage, said Dunleavy told lawmakers that he will not call them back into session immediately. That means a previously scheduled August special session may be the next opportunity.

Although the budget has now passed both House and Senate, lawmakers failed to approve spending from the state’s Constitutional Budget Reserve and failed to maintain dozens of program-specific savings accounts. The state constitution requires that the budget is balanced, so by not approving spending from the Constitutional Budget Reserve, some programs lost funding.

As a result of this week’s failed votes, about 85,000 Alaskans may lose access to the Power Cost Equalization program, which subsidizes home electricity prices in rural Alaska. Thousands of high school students will not receive scholarships promised by the state through the Alaska Performance Scholarship program.

Wednesday’s outcome satisfied none of the Senate’s 20 members.

“Eighty-five thousand of the poorest Alaskans are going to be kicked in the butt and put on the street when it comes to energy,” said Sen. Bert Stedman, R-Sitka, who urged lawmakers to vote yes.

Sen. Roger Holland, R-Anchorage, asked senators to vote against the budget and convene a new committee to rewrite it.

“This budget bill is a dumpster fire. We need to put a stake in its heart, put it to rest, get another conference committee together and fix it,” he said.

As he spoke, Holland wore a lapel pin that featured a burning trash receptacle.

The Senate initially voted 10-8, one vote short of the 11 required to pass the budget, but lawmakers took a brief break and revoted, returning a 11-6 result after Sen. Lyman Hoffman, D-Bethel, switched from no to yes and Sen. Bill Wielechowski, D-Anchorage, left the room.

Five Republicans and one Democrat voted against the budget; in addition to Wielechowski, Sens. Donny Olson, D-Golovin and Mike Shower, R-Wasilla, were excused absent from the vote.

The budget reserve vote, which includes a procedural move called the “reverse sweep,” failed 12-5. Fifteen votes were needed in the Senate, though even a successful vote would have had little effect because the House failed to approve it last night.

The votes failed because of continuing disagreements about the proper size of the Permanent Fund dividend.

On Sunday, members of a House-Senate panel set this year’s dividend at $1,100, but that amount required approval of the reverse sweep and approval of spending from state savings.

The Senate approved a $2,300 dividend earlier this year, and the lower amount in the final budget outraged lawmakers who supported a larger dividend. But because the $1,100 dividend was partially funded from savings, voting against that figure shrank the payment to just $525.

Some lawmakers were further provoked by the fact that funding for some construction projects, many in the Matanuska-Susitna Borough, were also tied to the vote. Those projects, including reconstruction of Houston Middle School — damaged during the 2018 Southcentral earthquake — are now on hold.

It’s a legal maneuver, said Senate Majority Leader Shelley Hughes, R-Palmer, but that doesn’t mean it’s the correct approach.

“I could drive my car and hold the steering wheel with my feet, but it doesn’t mean that it’s a good idea,” she said.

Hughes voted against the budget, as did several members of the Senate’s predominantly Republican majority, even though the final version was mostly crafted by Stedman, who is in the majority.

Stedman favors a smaller dividend than people like Sen. Mia Costello, R-Anchorage, who said the state should fund a dividend close to the $2,300 figure that would be produced under a new dividend formula proposed by the governor.

Sen. Natasha von Imhof, R-Anchorage, was outraged by the idea that the state might shut down because senators couldn’t agree on the amount of the dividend.

“The greed and the entitlement is astounding to me. I just don’t fathom it. My father is at home dying of cancer, and I am here, listening to the biggest crock of crap I’ve ever heard. I’m so sick of it,” she said.

The budget only passed because some minority Democrats voted for it, causing Senate Minority Leader Tom Begich, D-Anchorage, to criticize the majority for potentially causing a government shutdown because of internal disagreements.

“We create ambiguity, we create uncertainty, we create a problem for all of us if we don’t resolve this today,” he said.

Lawmakers are in a special session that ends Friday, but another special session is scheduled for August. That session has been called by the governor, but Micciche said he hopes that lawmakers can agree to call themselves into session and fix the issues that remain.

“I’ve said this before: It’s sort of civil-war-ish, with a family vs. family thing. We have to we have to fix this problem so that we can get on to the other issues that are facing Alaska,” he said.