Alaska Legislature passes budget compromise that could send $3,200 to Alaskans

JUNEAU — The Legislature on Wednesday night passed a budget that includes $3,200 payments to Alaskans, in the final hours of a session marked by a windfall of revenue from high oil prices.

The budget next heads to the desk of Gov. Mike Dunleavy. The Republican governor did not say whether he would sign the budget when the session concluded just after midnight, but spokesman Jeff Turner said Dunleavy “will not be calling an immediate special session.”

What lawmakers could agree on was a compromise that includes payments to Alaskans of a $2,550 Permanent Fund dividend — half of the 5% draw of the Permanent Fund’s overall value that lawmakers have designated for spending — and $650 in one-time energy relief assistance for every dividend recipient.

That marks a departure from the budget passed by the Senate last week, which included a full statutory dividend of $4,200 on top of the $1,300 energy relief checks. The House — which agreed last month on $2,600 payments to Alaskans — rejected the Senate’s plan on Saturday, leading to marathon negotiations by a conference committee made up of Senate and House members expected to find a middle ground.

“We were tasked with completing two weeks’ worth of work and negotiations in three days. But when you put a woman in charge, it gets done,” said Rep. Kelly Merrick, an Eagle River Republican who helped lead the conference committee negotiations.

The committee’s plan also includes long-sought funding increases for public education, and a capital budget that encompasses hundreds of millions of dollars for port projects in Anchorage and Nome.

The compromise reverses a Senate plan that would have spent most of the state’s revenue windfall from higher oil prices stemming from the war in Ukraine. Instead, the current plan leaves around $700 million for forward-funding of K-12 education. It also puts around $800 million in the Statutory Budget Reserve account by the end of the next fiscal year, if oil prices remain close to the Department of Revenue’s most recent projection of $100 per barrel.

In order to balance the budget, the state depends on high oil prices. If the price per barrel drops below around $94 in the coming fiscal year, the Statutory Budget Reserve would be emptied.

The Senate favored the spending plan overwhelmingly, with only Eagle River Republican Sen. Lora Reinbold opposed.

“The biggest threat to the Permanent Fund dividend has always been and will always be big, bloated government,” said Reinbold, a staunch supporter of a full statutory dividend who said she had hoped to see less spending on state services.

In the House, the budget passed in a 33-7 vote around 10:30 p.m. after only a brief discussion. All “no” votes came from Republicans, including Minority Leader Cathy Tilton from Wasilla.

“I feel sad for Alaskans,” Tilton said after the House adjourned, lamenting the unfulfilled expectations planted by the Senate’s $5,500 budget plan. “I’m a person who likes expectation management.”

In the Senate, Republican supporters of the full dividend said the budget compromise was good enough to earn their support.

“I can’t say no at this point,” said Sen. Mike Shower, a Wasilla Republican who last week made the key amendment to increase the Senate’s dividend to the full statutory amount. “Standing on my principle — for what?”

“This is lifesaving for some people,” Shower said.

‘Feast or famine’

A separate vote to approve a draw from the Constitutional Budget Reserve to cover an additional $650 in energy relief per Alaskan required support from three-quarters of both the House and the Senate. The Senate just reached that threshold, with 15 senators in favor. In the House, the vote narrowly failed in a 29-11 split.

Rep. Grier Hopkins, a Fairbanks Democrat, was the last to cast his vote on the draw, ultimately voting against the measure, cutting the energy relief amount in half and saving the state $420 million in spending.

“It was a hard vote. I think the dividend amount plus the $650 will help Alaskans and I think that’s important,” Hopkins later told reporters. “I don’t think any elected officials should make their votes based on reelection. I think they should make it based on what’s right for their state and all of Alaskans.”

Among the five Senate opponents of the draw was Sen. Lyman Hoffman, a Bethel Democrat. He said he wanted smaller energy relief checks this year to ensure that the dividend amount next year would not drop significantly.

“It’s either feast or famine, and we need to stabilize the dividend,” Hoffman said.

Dunleavy previously said he wanted a minimum dividend of $3,700. The governor on Wednesday afternoon urged lawmakers to vote in favor of the Constitutional Budget Reserve draw to bring energy relief checks up to $1,300.

Members of the House majority caucus said Speaker Louise Stutes, a Kodiak Republican, told the caucus that Dunleavy threatened to veto capital projects in the districts of House members who vote against the draw. A spokesman for Dunleavy did not respond to questions about that position.

In a statement released after the Senate vote, Dunleavy thanked the Senate members who voted in favor of the draw, saying they “voted with the people in mind first and foremost.” He did not release an additional statement after the vote on the draw failed in the House.

Election-year politics

The final hours of the 120-day legislative session were relatively tame after several tense days in the Capitol. During conference committee proceedings Tuesday, Chairman Sen. Bert Stedman, a Sitka Republican, twice ordered doors barricaded to stop others from slowing the work of the committee.

While the payments to Alaskans originally passed by the Senate were lowered by $2,300 in the budget compromise and the failure of the vote on the Constitutional Budget Reserve draw, the Permanent Fund dividend would still be one of the highest in state history after correction for inflation.

Stedman — who supported the budget but opposed the Constitutional Budget Reserve draw — said giving out that high payment without a permanent solution to a years-long conflict over the way the dividend amount is calculated would make it more difficult to resolve in the coming year. An effort by the Senate to change the statute this year failed amid high earnings that translated to a proposed dividend three times higher than the one paid last year.

“The conversation is going to be more difficult for the public,” Stedman said.

Lawmakers acknowledged that the upcoming election season — the first under a new ranked-choice voting system approved in 2020 — factored into some elected officials’ support for the higher dividend.

“If it wasn’t an election year, you wouldn’t see the dividend size that it is,” Stedman said. “There are a lot of folks in the building who feel that their chances of reelections are a lot higher if the treasury is lower and the dividend is higher.”

Dunleavy, also up for reelection this year, could veto line items within the budget — a move some lawmakers said they would support.

“Yeah, I’d like to see some trimming. I assume the third floor will probably do some of that,” said Shower, referring to Dunleavy’s office on the third floor of the Capitol.

With negotiations on bills coming down to the wire, and some bills failing to pass before the deadline, Senate leaders did not rule out a special session later in the year, when some priorities including a plan for the dividend calculation could be worked out.

“I don’t know if the governor is going to call us back, but frankly, I hope he does,” said Senate President Peter Miccicche, a Soldotna Republican.

Campaign contribution limits fail to pass

An effort to pass campaign contribution limits ground to a halt in the final hours of the session, leaving the state with no immediate prospects for limiting money going into local and statewide political races after a court invalidated Alaska’s contribution limits earlier this year.

Senate Minority Leader Tom Begich, an Anchorage Democrat, attributed the failure to an hourslong delay in the drafting of an amendment from a coalition of Democrats and Republicans that would have made the bill palatable to Dunleavy, who might otherwise nixed the limits, Begich said.

“The governor needed to see a bill that combined APOC (Alaska Public Offices Commission) reform and election reform,” Begich said. “If you know the only way you’re going to get campaign finance limits is if you have this other limit, then you have to make an honest commitment to working on that.”

Student reading bill narrowly squeaks by

The House voted narrowly to advance a bill that would target lagging reading performance in the state with new programs, early education funding, and an overall increase to the formula used to calculate school funding.

The vote was seen as a win for the governor, who has threatened to veto other education funding without a reading bill on the books.

The measure was attached to another bill in the Senate and passed unanimously there Tuesday, in a move meant to circumvent the House committee process after the House Education committee voted against advancing the measure.

The House voted 21-19 to advance the bill, with several majority members strongly opposed to what they said amounted to too little funding and too much local control taken away from schools. Some also said the bill would disadvantage rural students and those for whom English is a second language. And Rep. Ben Carpenter, a Nikiski Republican, called the bill “a poster child for the dysfunction that exists within the Legislature.”

Attaching stalled measures to other bills in the final hours of the session is a common tactic as lawmakers muscle priorities across the finish line with a deadline in sight.

“I don’t think there was anything unusual about that kind of salvation that occurs in the last night,” Micciche said. “None of the things that I saw sandwiched tonight were a stretch of the code.”

Mixed emotions in the Capitol

At the conclusion of the session, emotions in the halls of the Capitol were mixed. Music blasted through the hallway, and alcohol filled the cups of some lawmakers and staffers.

Stutes retreated to her office after staff members said she was too tired to answer questions from reporters. But inside her office, she hosted House majority members and staffers who cheered and clapped as gifts were exchanged.

“If you could take my feelings and divide them perfectly in half, one half would be somewhat elated, and the other half would be very disappointed,” said Micciche.

“Today was like an NBA season. There’s 82 games that occur in an NBA season and it all comes down to the last 30 seconds of game seven. And in the last 30 seconds of game seven today, we got a lot done.”

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Correction: An earlier version of this article incorrectly identified Senate Minority Leader Tom Begich as a Republican. He is a Democrat. It also incorrectly summarized comments on the budget by Sen. Lora Reinbold. She said she’d hoped to see less spending on state services, not state services and capital projects.