Alaska House’s draft budget has a $2,272 dividend, $175 million in extra school funding

JUNEAU — The state House Finance Committee on Friday unveiled its latest draft budget with $175 million in one-time school funding, and a combined $2,272 Permanent Fund dividend and energy relief check.

Veteran lawmakers cautioned that the check received by Alaskans this year would likely be reduced as the budget advances through the legislative process.

Lawmakers recently learned that the state expected to collect an additional $200 million in oil revenue over two fiscal years compared to a December forecast. The Republican-led House’s draft spending plan was projected to have a $152 million surplus for the fiscal year that starts July 1.

”We funded a lot of the things that people were concerned about being left out,” said Palmer Republican Rep. DeLena Johnson, who manages the House’s operating budget.

Around $175 million in extra school funding was added to the budget on top of normal formula funding. The Legislature approved the same one-time figure last year, which was then halved by Gov. Mike Dunleavy’s veto pen. A veto override vote to restore that funding failed at the start of the legislative session.

As written, the extra school funding would be removed from the budget if legislators approved any increase to the Base Student Allocation — the state’s per-student funding formula. Permanently boosting the $5,960 BSA by $680 would cost roughly $175 million per year.

The finance committee also added almost $4 million in funding for victims of domestic violence and sexual assault that was left out of Dunleavy’s budget.

Johnson’s staff warned that the projected $152 million surplus could quickly disappear with spending expected to be added to the final budget. That includes:

• $23.5 million for a benefits program for low-income seniors that is broadly supported across the Legislature.

• $38 million that may be needed to fund a potential shortfall at the Alaska Marine Highway System.

• More maintenance funding that could be added for schools with reports of dilapidated facilities in Western Alaska, alongside more maintenance funding for the University of Alaska.

• Funding new labor agreements for state employees, which are currently being negotiated.

Rep. Bryce Edgmon, I-Dillingham, said in legislative parlance, a surplus is usually referred to as “headroom.” That refers to setting aside some anticipated revenue, largely in case oil revenue comes in lower than expected.

The $2,272 in checks being considered by the House has been cobbled together from various sources: a projected surplus for the current fiscal year, extra oil revenue that had been set to go to state savings, and revenue from the Permanent Fund.

“It’s likely to be nowhere near that number,” said Anchorage Democratic Rep. Andy Josephson. “Spending almost every last dollar on dividends, it just isn’t going to happen. It just isn’t. It’s just pie in the sky.”

“Same old dividend argument again,” said Sitka Republican Sen. Bert Stedman, who manages the Senate’s operating budget.

The Senate has favored a $1,360 PFD, following the 75-25 formula. Three-quarters of an annual draw from the Permanent Fund would go to state services, and the rest would go to the dividend. With extra oil revenue from the current fiscal year for energy relief, a combined Senate check was expected to be almost $1,600.

There has been little appetite in the Senate, in particular, to draw from the state’s $2.8 billion savings account to pay for a larger dividend or state services.

One point of contention has been the Department of Corrections budget, which has increased by around 36% over the past five years, or close to $100 million. For now, the House Finance Committee has withheld $40 million requested by the department for the current fiscal year, largely to pay overtime costs to correctional officers due to understaffing.

Rep. Julie Coulombe, R-Anchorage, called the corrections budget increases “outrageous.” She said she was pleased to hear the House and Senate finance committees wanted to bring state officials back to explain why the department’s budget had substantially grown.

The House typically first writes the operating budget, which funds state department operations and countless state programs. The Senate usually takes the lead on the capital budget, which funds infrastructure and maintenance projects.

Last year, the Senate combined both the operating and capital budgets into a single bill, and advanced both budgets to the House on the last day of the legislative session. House members were frustrated by the Senate’s take-it-or-leave-it approach.

Legislative leaders this year have agreed to hammer out the size and scope of both budgets on a set timetable. The House is set to advance the operating budget at the same time the Senate advances the capital budget. That way, neither legislative chamber has both bills at the same time.

“The idea is that we will exchange budgets on April 12,” Johnson said on Friday.

Operating budget amendments are set to be considered by the House Finance Committee next week, leading into Easter when legislators usually take an extended break. The operating budget is anticipated to be on the House floor soon after that before advancing to the Senate.

Johnson said that the draft budget unveiled Friday was “the beginning of the process” of negotiations with House members, the Senate, and eventually the governor.

“If this budget didn’t get changed, I think it would be the first time in state history that we passed the House operating budget fully unchanged,” she said to the finance committee Friday.