Alaska House budget debates stall over plan to use savings for one-time school funding boost

JUNEAU — The Alaska House of Representatives’ progress on the budget stalled Wednesday with a mass exodus from the Capitol after an amendment was proposed by the Republican-led majority to use savings to pay for a one-time boost for education.

The House adopted an amendment in a 39-1 vote on Monday to increase spending for public schools by $175 million outside of the Base Student Allocation, the state’s school funding formula. But the increase would only be for the fiscal year that starts July 1.

On Wednesday morning, members of the House majority voted to rescind their support for the funding boost, instead proposing a budget amendment to pay for the education spending from savings, rather than from the state treasury.

House Speaker Cathy Tilton, R-Wasilla, said that Wednesday’s change of the fund source for the education boost was prompted when the minority proposed an amendment to have half of the $2,700 Permanent Fund dividend in the budget paid from savings. Support from minority members is needed to draw from savings, and they threatened to withhold it.

In response to the majority’s amendment, 14 of 16 House minority members — mostly Democrats and independents — left the state Capitol in protest at noon, and did not return until 3 p.m.

Anchorage independent Calvin Schrage, the House minority leader, was one of two minority members to remain on the floor. He said he would fight for education and that drawing down Alaska’s $2 billion Constitutional Budget Reserve — the state’s main savings account — by roughly $600 million would be fiscally irresponsible.

The need for a draw from the Constitutional Budget Reserve, which requires a three-quarters approval vote by both chambers, is driven in part by the House majority’s support for a $2,700-per-Alaskan dividend, which would cost the state $1.8 billion. Some minority members have argued in favor of decreasing the dividend size to $1,300 per Alaskan — an amount also favored by the Senate majority — which would allow the state to cover the education costs while avoiding the need to dip into savings. A proposal to shrink the dividend to that figure was solidly rejected by the House on Monday.

Minority members said Wednesday that the majority’s measure would put them in a difficult position: While they opposed passing a budget that would draw hundreds of millions of dollars from savings, they would be unlikely to vote against an education boost that they say was named as a top priority by many of their constituents.

Tilton acknowledged Wednesday that the additional education funding was added to the budget because children and schools need a “little bit extra right now.” But Palmer Republican DeLena Johnson, who manages the House’s operating budget, said it was “prudent” that a school funding boost would come from savings, rather than the state’s general fund, reasoning that the proposal was part of budget negotiations.

Majority members said that the draw from savings would incentivize lawmakers to continue working on a long-term fiscal plan to balance the budget, potentially with a new dividend formula and new state revenues. Agreement on such a plan has long evaded lawmakers since a drop in oil prices forced them to rely on revenue from the state’s Permanent Fund to cover operating costs beginning in 2016.

The budget reserve may be a savings account, but it is also used to manage cash flow if there are state revenue fluctuations. State accountants have said that the fund should have a minimum of $500 million cash on hand, but that is not dictated by state law, and there are other options to cover budget shortfalls.

Johnson said Monday that it was “unlikely” a permanent school funding increase would be approved this year, and that discussions should continue during next year’s legislative session.

After two days of largely smooth budget debates, the House majority’s proposal to change the funding source for extra education spending sparked heated talk on the floor and sharp words between lawmakers.

Schrage said that education was being held “hostage” in budget negotiations, which led to an immediate backlash from majority members.

“I don’t want to be called a hostage taker,” said Dillingham independent Bryce Edgmon, a former House speaker who was a member of the previous bipartisan majority caucus with Schrage.

Schrage placed a call on the House shortly after his colleagues from his own caucus departed the building, a move by which lawmakers can legally compel their colleagues to return to the floor vote. The move forced Capitol security to search for the missing minority members, who had left the building for an undisclosed location and could not be found, forcing a long delay on the debate regarding school funding.

After a three-hour break, the minority caucus members returned to the House floor. Several, such as Anchorage Democrat Jennie Armstrong, opposed what she called the “scorched earth tactics” used by the majority, which earned swift rebukes from Tilton for impugning lawmakers’ motives.

Anchorage Democrat Andrew Gray said the majority and minority had been working well, but he now felt forced to approve a larger dividend to get more funding for schools.

“It feels like we’re trapped,” Gray said.

North Pole Republican Mike Prax said it was “unfortunate” but budget negotiations in recent years have included a fight on the supermajority vote required to draw from savings. House Republicans, then in the minority, initially blocked using savings in 2019 to keep dozens of state accounts full during protracted budget battles.

On Wednesday, the House approved the plan to draw from savings for extra school funding on a 23-17 vote. All members of the majority voted in support and all minority voted against the amendment. They were joined in opposition by Wasilla Republican David Eastman, who doesn’t sit with either caucus.

But the minority then introduced a series of previously rejected amendments to spend more from savings on state services. Those amendments were quickly tabled one by one, but the minority members’ tactics forced an hourslong delay that culminated with the House adjourning at 6 p.m. Wednesday without taking the final needed vote on the education funding plan.

Tilton said after adjournment that she decided to end the session because emotions were running high and she hoped the overnight break would allow cooler heads to prevail. Schrage said there would be “a reset” for Thursday’s floor session.

The spectacle of the education and budget fights on the House floor frustrated Anchorage School Board member Carl Jacobs. He wrote on Twitter that a decision by the majority to rescind their support for the simple $175 million education funding increase was “incredibly disappointing.”

”Alaska’s students are not political pawns. We are better than this,” Jacobs wrote. He later said in a brief phone interview that he was “anxiously watching” the House proceedings this week that could determine the size and reliability of education funding.

Regardless of the outcome in the House, the budget can be significantly modified by the Senate, which is controlled by a bipartisan majority that is striving to write a budget without needing to draw from savings. Senate President Gary Stevens, R-Kodiak, said Wednesday he’s “not happy about that at all” when asked about the House majority’s decision to tie one-time education funding to the Constitutional Budget Reserve.

”That should not be a source to fund education,” Stevens said.

In prior years, the minority has threatened to block drawing from savings for leverage until before the final budget vote — after the other legislative chamber has had its say. The Legislature is likely still weeks away from concluding its work on the budget.

Sen. Jesse Kiehl, D-Juneau, said of the House minority’s actions Wednesday that it was “a little early to be turning up the heat.”

Many lawmakers have flights booked to their home districts for the Easter weekend. Tilton said Wednesday evening that she still hoped to advance the budget to the Senate before then.

Sean Maguire reported from Juneau and Iris Samuels from Anchorage.