‘It’s all in flux’: Alaska budget disputes unresolved on the dividend, education funding

JUNEAU — With just over a week left until the end of the legislative session, the Alaska House and Senate have still not passed a budget, resolved the size of this year’s Permanent Fund dividend or agreed on additional funding for public schools.

The House’s largely status quo operating budget advanced to the Senate in April with a $2,700 dividend, following the “50-50″ model, at a cost of more than $1.7 billion. The House’s budget was projected to create a $600 million deficit, which ballooned to roughly $800 million with additional spending for capital projects.

The Senate hasn’t passed its version of the operating budget or the capital budget, which is used for infrastructure and renovation projects, and there is no set plan for when a final vote will take place. The Senate has indicated support for a $1,300 dividend — following the 75-25 model — which was projected to leave the state with a $90 million surplus and not require drawing from savings.

Senate President Gary Stevens, R-Kodiak, and House Speaker Cathy Tilton, R-Wasilla, both said that legislative leaders are busy trying to craft a compromise budget agreement and adjourn by the 121-day constitutional session deadline, which falls on May 17. Stevens said in a brief interview Monday that “it’s all in flux right now,” and that, “We’re still talking, so that’s good.”

Falling oil prices in March were projected to leave the state with a $925 million revenue hit over two fiscal years. A House majority plan to use savings to fill the projected deficit then failed to get the required three-quarters approval vote of House members, with all minority members against the draw.

Sitka Republican Sen. Bert Stedman, who manages the operating budget in the Senate, had been firm in saying that the Senate would not support drawing from the $2 billion Constitutional Budget Reserve — the state’s main savings account — to balance the budget. In a brief interview Monday, Stedman said both legislative chambers were working together to find a compromise.

“You’ve got softening financial markets, and softening oil markets — you need to be careful,” he said about drawing from savings to pay for the annual budget. “There’s a limit of reserve capacity. That’s a concern.”

Typically, the House and Senate pass different versions of the budget and then resolve those differences through negotiations, so a single bill can pass both legislative chambers and onto the governor’s desk. The House could simply approve the Senate’s budget, which is known as concurrence. The House last concurred with the Senate’s budget in 1982.

House Minority Leader Calvin Schrage, an Anchorage independent, said that he likes the Senate’s budget because it doesn’t require a draw from savings, funds core services and includes $15 million for child care provider wages. Schrage said Thursday he did not think there was enough votes from the Republican-led House majority to support passing the Senate’s budget. Neither are there enough votes to draw from savings to fill the deficit and pay for the House’s budget, he said.

“Where do you go from here?” he asked. “The numbers are the numbers are the numbers. There’s only so much revenue.”

One of the bipartisan Senate majority’s top two legislative priorities has been substantially and permanently increasing school funding this year. Education advocates have said that the state’s public school system is in crisis after being hit by high inflation, years of flat funding and the end of federal COVID-19 relief.

A Senate committee advanced legislation Monday to the full Senate that would increase the Base Student Allocation — the state’s per-student funding formula — by $680 at a cost of $175 million per year. Amendments were added to increase state payments for student transportation costs by $8 million, or 11%. State boarding school students would also get a $4.5 million boost for their monthly stipends, representing a 50% increase.

Anchorage Democrat Löki Tobin, co-chair of the Senate Education Committee, spoke in support of the BSA bill and said that it met the committee’s policy goal of “significantly increasing” school funding.

“It’s clear to us that the Alaska public education system is struggling,” she said to the Senate Finance Committee on Monday, adding that, “We need to do something drastic.”

Alaska education advocates had said an $860 BSA boost was needed this year — just to match losses from inflation. Earlier in the session, the Senate had debated a $1,000 school funding formula increase, but that “bold approach” — as described by Tobin — was watered down following the state’s gloomy revenue projections.

The House attempted to add the same $680 BSA boost to its budget, but only for the fiscal year starting July 1. A three-quarters approval vote to pay for that funding increase from savings failed, meaning it was deleted from the House’s version of budget.

The dividend remains unresolved, and so does the question of whether a public school funding increase should be permanent or temporary. The Republican-led House majority has signaled a preference for delaying debate on the BSA to next year.

“Those are the big issues and we don’t have answers to those yet,” Tilton said Friday about adjournment discussions with the Senate. “But we’re working on those.”

Tilton said the House majority’s priorities include a bill intended to address the fentanyl crisis with longer sentences for opioids, which recovery advocates have said would be counterproductive; election reform, following a bipartisan and bicameral plan to verify signatures on absentee ballots and to allow voters to correct mistakes on those ballots; and a tighter legislative spending cap as part of a broader fiscal plan to address Alaska’s structural deficit.

For the 17-member bipartisan Senate majority, Stevens said his caucus’ legislative priorities include seeing the House pass Senate Bill 107 — a 75-25 dividend formula measure, which could double to the House’s preferred 50-50 dividend with substantial new state revenue — and a permanent school funding increase.

Alaska Gov. Mike Dunleavy’s bills to raise state revenue from carbon sequestration and carbon offsets are a priority for the governor, multiple lawmakers said. The House has been focused on Dunleavy’s measure to monetize storing carbon underground, while the Senate has shown more support for the offsets bill, which would allowed carbon credits to be sold off state forested land. Key members of the Senate majority said there is not enough time left in the session to vet the underground sequestration proposal.

While there are sharp disagreements between the House and Senate about the budget, the dividend and legislative priorities, Anchorage Republican Rep. Craig Johnson, who served nine years in the Legislature before returning to the Capitol in January, said it was nothing out of the ordinary.

Dunleavy has signaled that he may call a 30-day special session later in the year to debate a long-term fiscal plan, but Stevens remained hopeful that the Legislature could pass a budget for the fiscal year that starts July 1, before the regular legislative session ends at midnight of May 17.

“Just say a prayer for us,” he said with a chuckle Monday.