House delays vote on budget that could send $5,500 to Alaskans and drain state savings

JUNEAU — The Alaska House has delayed a critical vote on a budget that could send $5,500 checks to Alaskans.

The delay comes amid concerns by the bipartisan House majority that enough House members will vote in favor of the Senate’s version of the bill to send it directly to the governor. They say the dividend could jeopardize rebuilding the state’s savings and leave Alaska’s government in dire straits if oil prices drop.

The House was set to vote on the budget Wednesday evening after the Senate passed it Tuesday. But in an unusual move, House Speaker Louise Stutes, R-Kodiak, adjourned until Thursday morning before the full House was set to convene, with only one other House member present.

The House was again expected to meet at 10 a.m. Thursday, but the floor session was delayed and eventually canceled for the day, with a plan to convene sometime Friday.

It would take 21 of the 40 House members voting in favor of the budget to send it directly to Gov. Mike Dunleavy’s desk with no changes.

Dunleavy, a Republican, has not made his position on the Senate budget public, but a full statutory dividend has long been his goal, and he has been meeting privately with lawmakers ahead of the House vote.

The House last month passed a budget that included around $2,600 in cash for Alaskans, divided between $1,300 energy assistance checks and $1,300 dividends. That budget also allowed for some state savings.

The Senate doubled the amount that would be sent to Alaskans in the budget it passed on Tuesday. The Senate version includes a full statutory $4,200 dividend on top of the $1,300 energy assistance checks. That would amount to $2.7 billion in state spending on the dividend and $840 million on energy relief checks.

If the budget remains unchanged, it could drain the state’s savings even in a year that brought unexpected revenue due to high oil prices.

“The speaker is working to ensure that the budget that reaches the governor’s desk is fiscally responsible,” said Joe Plesha, spokesperson for the House majority, in a statement explaining the delay on the vote. “She remains committed to the values outlined in the budget the House passed — putting money into savings to prepare for the eventual drop in oil prices and investing in Alaska’s children by forward funding education and refilling the Higher Education Investment Fund.”

‘Irresponsible dividend’

Rep. Zack Fields, D-Anchorage, blasted Dunleavy for what he says is an effort by the governor to convince lawmakers to concur with the budget. But it would take several members of the majority — most of whom are Democrats — to reach the necessary vote threshold to pass the budget.

“The Senate sent us back a budget with a dividend figure that literally not a single senator thought has a chance in hell of passing, because it is totally unreasonable, completely unaffordable and defunds education funding,” Fields said. “So then the governor jumps in at the last minute and starts urging members to vote yes on concurrence.”

Supporters of the larger dividend in the Senate had said they expected the House to reject their budget version, which would force lawmakers to reach a middle ground in a conference committee composed of majority and minority members of both the House and Senate.

Fields said the governor has been “strong-arming members, including trying to strong-arm traditional fiscally conservative people.”

Dunleavy has been “meeting with lawmakers from all four caucuses on the budget,” according to a statement from spokesman Jeff Turner.

The governor’s office would not say which lawmakers have met with Dunleavy and what was discussed in those meetings.

“He is committed to working with lawmakers on a spending plan that can receive legislative approval by May 18, the constitutional deadline for this year’s legislative session,” Turner said in an email.

If they do not pass a budget by the May 18 deadline, the Legislature could be forced to enter a special session.

Once the Legislature passes the budget, Dunleavy could veto line items.

Joelle Hall, president of Alaska AFL-CIO, confirmed Thursday that she had heard some majority members indicated they would vote to concur.

The labor organization released a statement Wednesday urging lawmakers to reject the Senate budget.

“Shame on every legislator who has stood in the way of good policy to save a penny, only to throw it all away on an irresponsible dividend,” Hall said in the statement.

Some Republican House minority leaders have previously indicated that they support a full statutory dividend. The majority members in favor of the budget could be swayed not only by the large dividend but also by hard-fought money for capital projects at the Port of Alaska in Anchorage and the Port of Nome, which were priorities for House Finance committee co-chairs Kelly Merrick, R-Eagle River, and Neal Foster, D-Nome.

Quiet hallways, closed-door meetings

The current debate at the Capitol — over a super-sized dividend and massively increased capital budget — would have been almost unimaginable at the start of this year’s legislative session. Dunleavy’s initial proposal called for a roughly balanced budget this year, coming after nine straight years of deficit spending amid lower prices and production of oil.

Then, after Russia’s invasion of Ukraine, oil prices spiked and added roughly $3.6 billion to the state’s predicted revenues during the current and upcoming fiscal years. And while a number of lawmakers cautioned that those predictions may not hold, legislators are still proposing to add some $3 billion in spending beyond what Dunleavy proposed.

That includes $1.1 billion for higher dividends and a relief check to help Alaskans deal with higher energy prices, $900 million in higher capital budget spending, $250 million in agency operating budget increases and $465 million in supplemental spending in the current fiscal year, according to figures collected by legislative fiscal analysts.

If oil prices hold, just $750 million from the $3.6 billion oil windfall — which still isn’t assured — will be added to Alaska’s savings accounts. Some $300 million will be deposited into the Permanent Fund and $450 million will be left in the previously depleted Statutory Budget Reserve, though those numbers could change if oil prices fall.

Currently, oil prices are performing slightly below the Dunleavy administration’s latest projections for the year. To balance the budget in fiscal year 2023 without emptying the Statutory Budget Reserve, oil prices would have to remain at or above $93 a barrel in the 2023 fiscal year.

If the Statutory Budget Reserve is emptied, the Legislature could approve a draw from the Constitutional Budget Reserve with a supermajority vote by both the House and the Senate. The Constitutional Budget Reserve currently has around $1.3 billion. If oil prices drop below $73 a barrel in the coming fiscal year, that account would be emptied as well.

The hallways of the Capitol were eerily quiet Thursday as legislators held closed door meetings. Some House members were tight-lipped about their position on the budget; asked how he would vote, one lawmaker said he was undecided, then told a reporter that answer was off the record.

Privately, House lawmakers and staff said they were getting a barrage of correspondence from constituents urging votes for or against concurrence. One of those came from Terrie Gottstein, an Anchorage resident who described herself as a concerned citizen and emailed all 40 representatives, asking if those considering voting for the Senate’s “insane” budget had lost their minds.

“On what planet does it make sense to squander the windfall of current (but, as we know, not everlasting) high oil prices by going even further into debt to buy votes with a high payout to constituents, while abandoning a core governmental responsibility like education?” Gottstein asked. “Is that how you live your personal lives, by giving in to the temptations of instant gratification in trade for any responsible vision of tomorrow? How will you justify that to your children and grandchildren?”

Gottstein, reached by phone late Thursday, said she stood behind her message and shared a response from Big Lake Republican Rep. Kevin McCabe. McCabe, in his message, said that returning to Alaskans “what is rightfully theirs is not squandering anything.”

“I was elected by an overwhelming majority to follow the law, fight for your lawful PFD, and give the people the first draw before government,” McCabe said. “You have been denied your lawful PFD the last six years, and now have an opportunity to have some much needed relief. This is an easy decision for me — I will follow the law.”

Oil tax measure emerges in Senate

In an apparent effort to generate more revenue to pay for the supersized dividend, the Senate voted Thursday to force a hearing on a bill that would increase taxes on the oil and gas industry.

The motion to force the hearing on Senate Bill 107 was made by Senate Finance committee co-chair Bert Stedman, R-Sitka. The vote passed 12-4, and the bill will be heard Friday morning in the Senate Finance committee.

The move prompted Kati Capozzi, president and chief executive of the Alaska Chamber, to write to members of the Legislature opposing the budget passed by the Senate.

“The state’s operating budget as passed by the Senate is unsustainable and poses a risk to Alaska’s future economic growth,” Capozzi wrote. “The Alaska Chamber urges the Legislature to pass a budget that does not overly rely on savings or create deficits requiring severe cuts to state services or job-killing taxes to make up the difference.”

She called Senate Bill 107, which is sponsored by Sen. Bill Wielechowski, D-Anchorage, “a horribly anti-business piece of legislation.”

“This is just one example of what our members fear would result from passing an unsustainable budget,” she wrote.

Iris Samuels reported from Juneau and Nathaniel Herz from Anchorage.