With more than half of Alaska’s regular legislative session over, attention in the state Capitol is focusing on a limited set of topics.
Before their scheduled adjournment in mid-May, leading legislators say they intend to pass a public school funding increase, enact one or more bills that would increase corporate taxes, and set the budget — including this year’s Permanent Fund dividend.
Late last week, all three priorities remained in a state of flux, and it wasn’t clear what form any will take by the time lawmakers leave Juneau.
Where’s the state budget?
Every year, the Legislature deals with multiple budget bills.
First, there’s the supplemental budget, which addresses problems — unforeseen expenses and rises and falls in revenue — with the budget that lawmakers passed last year.
That budget deals with the current fiscal year, which ends June 30. Right now, there’s almost a $200 million deficit in the current fiscal year. The House has passed a bill to address that deficit, but it has not yet unlocked the Constitutional Budget Reserve — the state’s main savings account — to fill the deficit.
The supplemental budget bill is scheduled for hearings in the Senate this week. That bill could advance through the Senate separately, or it could be combined with another budget bill. Regardless of what the Senate does, the House will still have to vote to unlock the CBR to balance the supplemental budget.
The Legislature may have to unlock the CBR for the upcoming fiscal year’s budget as well.
On Thursday night, the House Finance Committee approved a draft operating budget bill that would cover the fiscal year that starts July 1.
That draft is expected to face a vote of the full House this week. As currently written, it would result in a deficit of $1.9 billion, and that would have to be covered with money from the CBR.
As the House votes on the operating budget, the Senate is expected to vote this week on the capital budget, which pays for construction and renovation projects across the state.
As drafted, that bill contains only the minimum amount of state money needed to unlock federal grants.
There’s also the state’s mental health budget bill, which is moving forward along with the operating budget but is generally uncontroversial because it is paid for with the state’s mental health trust fund and doesn’t affect the rest of the budget.
What’s the state of education funding?
Right now, the House’s draft operating budget includes a funding boost for K-12 public schools that’s worth more than $250 million. Without additional legislation, that’s only a one-time boost.
On Wednesday, the Senate Education Committee advanced House Bill 69, which would permanently boost per student funding by $1,000, to $6,960 per student, and incorporates a variety of education policy changes like open enrollment statewide and capping class sizes.
The per-student increase would cost $253 million, plus an estimated $22 million for reading incentive programs, $706,000 for Mt. Edgecumbe High School, and over $158,000 for a new state charter school coordinator, totaling over $275 million.
Sen. Löki Tobin, D-Anchorage and the education committee chair, said she was aiming to find common ground through the latest version of the bill.
The bill moved to the Senate Finance Committee on Friday, but has not been scheduled for a hearing yet.
Gov. Mike Dunleavy took to social media on Thursday to criticize the education committee’s version of the bill, saying that it would “inequitable constraints” on students enrolled in correspondence programs. The bill would tie funding for these programs — which serve most of Alaska’s homeschool students — to students being assessed through a standardized test or portfolio.
Dunleavy introduced education legislation in January through the House and Senate to provide one-time funding for schools, and added a range of policy changes, including an expansion of the correspondence programs that enroll most homeschool students in the state. The proposal would cost an estimated $181 million next year, including $75 million for the homeschool students as well as career and technical education, and $14 million for transportation.
That measure, Senate Bill 62, is currently being heard in the Senate Education Committee, and its counterpart in the House, House Bill 76, is in the House Education Committee, with the next hearing scheduled for Friday, April 11.
How will Alaska pay for it all?
In recent years, the Alaska Legislature has used the amount of the Permanent Fund dividend to balance the budget, raising the dividend in good years and lowering it in bad ones rather than follow the dividend formula in state law.
Because of low oil revenue and the desire for more public school funding, taking that approach this year would result in a dividend well below $1,000.
That idea is unpopular among legislators, who are instead considering alternatives. One is the CBR, but because it requires a supermajority in the House and the Senate, it’s procedurally difficult. As few as six senators or 11 House members could block the draw from savings.
Overspending from the Alaska Permanent Fund is possible with a simple majority vote of the House and Senate, but that would reduce the amount of money available from the fund in the future and create significant uncertainty that likely would harm the state’s debt rating.
Some legislators, particularly in the Senate, are proposing tax hikes to address the situation. In late March, the Senate Resources Committee advanced a bill that would change the way the state’s corporate income tax applies to the oil company Hilcorp. That’s expected to generate as much as $150 million per year.
That bill, Senate Bill 92, is scheduled for a hearing Wednesday in Senate Finance.
The Senate Resources Committee is also considering a broader change to oil taxes that involves reducing a tax credit awarded to companies at certain oil prices on each barrel of oil. That change is in Senate Bill 112, which was heard Friday by the resources committee but doesn’t have another hearing on the calendar.
Enacting that bill is expected to generate as much as $190 million for state services or the dividend in the coming fiscal year.
The Senate Finance Committee is also considering a change to taxes on internet sales, but that’s not considered a substantial change.
The state House has yet to seriously consider any tax increases, and Gov. Mike Dunleavy has previously said that he strongly opposes any tax increases, which has hampered the drive to balance the budget by raising taxes.
• James Brooks is a longtime Alaska reporter, having previously worked at the Anchorage Daily News, Juneau Empire, Kodiak Mirror and Fairbanks Daily News-Miner. Corinne Smith started reporting in Alaska in 2020, serving as a radio reporter for several local stations across the state including in Petersburg, Haines, Homer and Dillingham. She spent two summers covering the Bristol Bay fishing season. Originally from Oakland, California, she got her start as a reporter, then morning show producer, at KPFA Radio in Berkeley. This article originally appeared online at alaskabeacon.com. Alaska Beacon, an affiliate of States Newsroom, is an independent, nonpartisan news organization focused on connecting Alaskans to their state government.
