Alaska House set to debate advancing budget this week, speaker says

JUNEAU — The Alaska House of Representatives is set to debate advancing the operating budget Monday after progress stalled this week due to disagreements with the Senate over the two legislative chambers’ spending plans.

The biggest sticking points between the House and Senate center on the size of the annual Permanent Fund dividend, a proposed increase to public school spending and the low balance of state savings accounts. A desire to implement a long-elusive fiscal plan is also looming in the background of annual budget debates.

The House’s budget, for the fiscal year that starts July 1, contains a $2,700 dividend at a cost of $1.7 billion, and a $175 million one-time boost to public schools outside of the Base Student Allocation, the state’s per-student funding formula. The House’s spending plan would require drawing roughly $600 million from the $2 billion Constitutional Budget Reserve, the state’s main savings account.

The Senate has indicated support for a $1,300 dividend, and has introduced legislation to make a permanent $1,000 increase to the school-funding formula at a cost of $257 million per year. The 17-member bipartisan Senate majority caucus has wanted to craft a budget without needing to draw from dwindling savings accounts.

The House typically first writes the operating budget, which authorizes appropriations for state agencies and programs. The Senate initially writes the capital budget, which is used to pay for infrastructure projects. But if the House first passed the operating budget, the Senate would have both appropriation bills. The Republican-led House majority had concerns that the Senate could combine both bills and have greater power to dictate the terms of the Legislature’s final spending plan for the fiscal year that starts July 1.

House Speaker Cathy Tilton, R-Wasilla, said Friday that the plan is to advance the operating budget to the Senate when the House next convenes on Monday morning. A planned House budget vote was abandoned earlier this week.

House and Senate leadership met Wednesday behind closed doors to discuss how to break the impasse. Sunday is the 90th day of the legislative session, which marks the oft-ignored statutory deadline for the session. Monday will be 30 days before the constitutional 121-day session limit. Discussions are ongoing between legislative leaders on budget priorities and how to adjourn on time.

“I think we were just starting to have the conversation,” Tilton said Friday about her talks with her Senate colleagues. “I wouldn’t say there was a resolution to that.”

After a sharp drop in oil revenue projections last month, Sitka Republican Sen. Bert Stedman said there was simply not enough state funds available to pay for the House’s dividend, a school funding increase and a larger capital budget to capture federal infrastructure dollars.

“I think there’s some new members that are surprised, and maybe even a little shocked that there isn’t the revenue stream to back up their election rhetoric,” he said Wednesday.

After Wednesday’s closed-door meeting, Anchorage Republican Rep. Craig Johnson said there would need to be trust between leaders of the two legislative chambers. He said that he had no reason to doubt a pledge from the Senate not to jam the two budget bills together.

House budget amendments were finalized last week following a dramatic walkout by the Democrat-dominated House minority caucus over a plan to use savings to pay for the temporary boost to school funding.

To spend from the Constitutional Budget Reserve requires an approval vote of three-quarters of lawmakers from both legislative chambers. House minority members needed to support drawing from savings, and they threatened to withhold it, which has become a routine threat from minority caucuses to extract leverage for their priorities. Anchorage independent Rep. Calvin Schrage, the House minority leader, reiterated Friday that he does not expect the supermajority vote to succeed.

“I would say that there is very little appetite to spend from our very limited state savings without a plan for how we make that sustainable,” he said.

The House and Senate typically pass different versions of the budget and then reconcile those differences through negotiations, so a single budget bill can pass through both legislative chambers and onto the governor’s desk. If a draw from savings is included in the final budget bill, the House would get another chance to approve the three-quarters vote.

Legislative leaders met with Republican Gov. Mike Dunleavy on Friday to discuss this year’s budget and a long-term fiscal plan, which could include new revenue measures, a spending cap and a new dividend formula.

The Senate has a bill that would increase taxes on the oil industry, and adjust state corporate income taxes so privately held producers like Hilcorp would need to contribute more to the state treasury. Provisions were dropped this week that would have prevented ConocoPhillips from reducing some of its tax obligations from the Willow project.

The Senate also has legislation that would establish a new dividend formula, where 75% of a now-annual draw from the Permanent Fund would go to state services, and 25% would go to the dividend. The Senate’s $1,300 dividend figure matches the 75-25 formula. Senate leadership has said new revenues would be required to pay a larger PFD.

The House has a broader slew of proposals to enact a fiscal plan, introduced by majority and minority members. One would implement a state sales tax while simultaneously reducing corporate income taxes. There is a proposal for a state income tax, and another plan to increase oil property taxes. One bill would set the dividend amount at one-quarter of earnings from the Permanent Fund; another would limit the dividend to $1,000 or less; another would change the Alaska Constitution to guarantee the dividend size is at least as large as what is promised in the existing statute; and yet another would put the formula for the now annual draw from the Permanent Fund into the constitution.

Dunleavy introduced legislation in January that would capitalize on storing carbon underground and forestry offsets. His proposals have advanced in the House, but the Senate has been more skeptical. The governor has been silent on backing other revenue-raising measures, but he has said he would not support an income tax. Instead, Dunleavy wants lawmakers to take the lead on crafting a comprehensive fiscal plan.

The regular legislative session must end by midnight of May 17.