Alaska House passes operating budget with dividend around $2,300, extra school funding

JUNEAU — The Alaska House advanced the operating budget to the Senate on Thursday with an almost $2,300 Permanent Fund dividend and $175 million in extra one-time school funding.

House Republicans responsible for crafting the budget said Thursday that their plan would not require drawing from savings. But leaders of the Senate majority, along with members of the House minority, have said the budget draft would lead to a more than $276 million deficit because it does not account for some expected pieces of legislation and $550 million in state infrastructure spending that is poised to pass the Senate later this week.

The budget passed along caucus lines on a 23-17 vote, with all members of the Republican-led majority caucus in favor of the spending plan. All 16 members of the Democrat-dominated minority voted no, along with Wasilla Republican Rep. David Eastman, who doesn’t sit with either caucus.

“We have a balanced budget and the word of the day is ‘compromise,’” said Palmer Republican Rep. DeLena Johnson, who manages the operating budget in the House. “Good compromise is reached when no one is particularly happy with the final product.”

Johnson called the budget a “collaborative project” and “far from perfect.”

Taking into account the expected size of the capital budget, expenditures on energy and required elements yet to be calculated, “this budget is hundreds of millions of dollars out of balance,” said Rep. Cliff Groh, an Anchorage Democrat.

“Revenues could fix this problem,” he said. But the Legislature has not seriously considered any legislation to significantly increase state revenues this year.

Permanent Fund earnings are expected to eclipse oil revenue this year as a source of state revenue, as has been the case in recent years, making the state increasingly dependent on those funds to pay for basic services.

The size of the Permanent Fund dividend again proved contentious. Alaska Gov. Mike Dunleavy proposed a budget in December with a full statutory dividend at roughly $3,400 per person. The governor’s spending plan would be more than $1 billion in deficit, requiring a substantial draw from state savings.

There has been a broad unwillingness among legislators to use savings to balance the budget. Johnson said Monday that “it was not possible” to approve a full PFD.

”I know some at home may be disappointed with the lower dividend in the budget, but this is the biggest PFD that the state can realistically afford,” she said Monday.

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The roughly $2,300 House dividend would cost roughly $1.5 billion. It is the largest single spending item in the House spending plan, and was cobbled together from a variety of sources: earnings from the Permanent Fund, a revenue surplus from the current fiscal year, and money the Legislature intended to deposit in state savings last year.

Supporters of the large dividend said that reducing its size would have the greatest impact on lower-income Alaskans.

“The people who rely on the dividend the most are the people with the least amount of income in this state,” said Rep. Ben Carpenter, R-Nikiski.

That view is shared by Republicans and some Democratic members of the chamber, but they have vastly different views on the needed solution. Some Republicans called for cutting state services until new sources of revenue — preferably from resource extraction — could be developed, while progressive members of the chamber said that state services were needed, alongside a broad new form of taxation.

Alaska is the only state that levies neither a statewide income tax nor a statewide sales tax while still paying its residents an annual check.

Rep. Zack Fields, D-Anchorage, called the House dividend “a fantasy” and said it was “completely unaffordable” during Wednesday’s floor session.

The House dividend is unlikely to survive negotiations with the Senate. Sitka Republican Sen. Bert Stedman, who manages the operating budget in the Senate, said Wednesday that the chamber was likely to support a dividend and energy relief check closer to $1,600 per person.

“Their spending plan has a significant deficit, which is concerning,” Stedman said Wednesday about the House budget, acknowledging that the Senate would also need to trim its version of the operating budget.

What’s in and out

The House added $175 million in extra school funding to the budget, on top of roughly $1.2 billion in school formula funding. That would be the equivalent of the $680 boost to the $5,960 Base Student Allocation that was included in the education bill vetoed by Dunleavy — but only for one year.

School administrators have said one-time funding has limited utility and doesn’t allow for long-term planning. The Legislature approved the same level of one-time school funding last year. Dunleavy then halved that funding increase with his veto pen.

Other top-line items in the budget include:

• $20 million for the University of Alaska Fairbanks, which is intended to graduate more doctoral students. UAF is seeking to become a top-tier research school through attaining R1 status.

• $7.5 million in child care grant funding, which was added with the intention to boost child care workers’ salaries by $1 per hour.

• $20 million that would be set aside for the Alaska Marine Highway System in case the state misses out on federal grant funding. The Senate has said $38 million should be reserved for the state ferry system to ensure it has enough funds to operate.

• $3.7 million was included for the Alaska Council on Domestic Violence and Sexual Assault. An additional $3 million in funding for victims of domestic violence was rejected on the House floor. Rep. CJ McCormick, a Bethel Democrat, said that “it’s really hard to rationalize this.”

Dozens of amendments were proposed on the House floor by the Democrat-dominated minority. Some would have reduced the House dividend; others would have boosted extra school funding in the budget, along with funding increases for social services. Most minority amendments were rejected.

On the floor Thursday, minority members complained that the budget had no funding for energy projects as the state faces a looming shortfall of Cook Inlet gas. Rep. Maxine Dibert, D-Fairbanks, said she would vote against the budget because it does not address Fairbanks’ high fuel costs.

“I can’t in good conscience send a budget over to the other body without addressing energy,” she said.

Around $6 million in funding for renewable energy projects in remote Alaska communities was rejected by the House on Wednesday. House majority members said the energy-related funding items could be added to the budget bill that deals with infrastructure projects. The first draft of that bill was adopted by the Senate Finance Committee on Thursday and was set for debate in the chamber Friday.

“There’s a little thing called the capital budget coming our way,” said Rep. Bryce Edgmon, I-Dillingham.

Over two marathon days on the floor, 137 amendments were written and prepared, but not all were offered. Seven amendments were adopted:

• $9 million to fund the landmark Alaska Reads Act, and pay for reading programs for K-3 students, with additional funding going toward lower-income students.

• $1.27 million for snowplowing in Southcentral Alaska after winter storms crippled Anchorage roads.

• $5 million extra for tourism marketing, along with $5 million for seafood marketing.

• $479,500 to pay for school meals for all school students who qualify for free and reduced-price meals for the next school year.

• $300,000 to help Team Alaska participate in the Arctic Winter Games next year.

• A drug-free zone would be established around a proposed Anchorage homeless shelter. The House approved spending $4 million for that shelter, which would allow it to remain open through the summer.

• Six vacant positions were cut at the state Department of Labor and Workforce Development out of 174 vacancies.

While the budget that passed the House was largely similar to the governor’s December spending plan, House members made reductions or cuts to several programs proposed by Dunleavy:

• $5 million was cut from the Alyeska Reading Institute, a contentious reading facility that lawmakers say has an unclear mission.

• Almost $600,000 was cut in executive pay for the Alaska Gasline Development Corp. Legislators have expressed frustration that a long-sought gas pipeline from the North Slope has failed to advance despite the state’s investments of millions of dollars over the years in the unrealized project.

• $278,000 was cut at the Department of Law to help support investigative grand jury proceedings. A controversial grand jury’s perjury charge against a retired Homer judge was dismissed in February.

The operating budget advances now to the Senate for its consideration. The Senate is set to send the capital budget to the House by Friday, following an agreement made by leadership of the two legislative chambers earlier in the year.

How they voted:

Rep. Jamie Allard, R-Eagle River (Y)

Rep. Jennie Armstrong, D-Anchorage (N)

Rep. Thomas Baker, R-Kotzebue (Y)

Rep. Ben Carpenter, R-Nikiski (Y)

Rep. Ashley Carrick, D-Fairbanks (N)

Rep. Julie Coulombe, R-Anchorage (Y)

Rep. Mike Cronk, R-Tok (Y)

Rep. Maxine Dibert, D-Fairbanks (N)

Rep. David Eastman, R-Wasilla (N)

Rep. Bryce Edgmon, I-Dillingham (Y)

Rep. Zack Fields, D-Anchorage (N)

Rep. Neal Foster, D-Nome (Y)

Rep. Alyse Galvin, I-Anchorage (N)

Rep. Andrew Gray, D-Anchorage (N)

Rep. Cliff Groh, D-Anchorage (N)

Rep. Sara Hannan, D-Juneau (N)

Rep. Rebecca Himschoot, I-Sitka (N)

Rep. Craig Johnson, R-Anchorage (Y)

Rep. DeLena Johnson, R-Palmer (Y)

Rep. Andy Josephson, D-Anchorage (N)

Rep. Kevin McCabe, R-Big Lake (Y)

Rep. CJ McCormick, D-Bethel (Y)

Rep. Tom McKay, R-Anchorage (Y)

Rep. Donna Mears, D-Anchorage (N)

Rep. Genevieve Mina, D-Anchorage (N)

Rep. Dan Ortiz, I-Ketchikan (N)

Rep. Mike Prax, R-North Pole (Y)

Rep. George Rauscher, R-Sutton (Y)

Rep. Justin Ruffridge, R-Soldotna (Y)

Rep. Dan Saddler, R-Eagle River (Y)

Rep. Calvin Schrage, I-Anchorage (N)

Rep. Laddie Shaw, R-Anchorage (Y)

Rep. Will Stapp, R-Fairbanks (Y)

Rep. Andi Story, D-Juneau (N)

Rep. Louise Stutes, R-Kodiak (N)

Rep. Jesse Sumner, R-Wasilla (Y)

Rep. Cathy Tilton, R-Wasilla (Y)

Rep. Frank Tomaszewski, R-Fairbanks (Y)

Rep. Sarah Vance, R-Homer (Y)

Rep. Stanley Wright, R-Anchorage (Y)

Sean Maguire reported from Juneau and Iris Samuels reported from Anchorage.