This is a developing story.
Gov. Mike Dunleavy on Thursday signed a state budget for the coming year that cuts $200 of a $700 increase in per-student school funding approved by the Alaska Legislature, part of $122 million in total cuts.
Dunleavy cited lower-than-expected oil prices for the line-item vetoes — the same factor cited by legislators when they passed a budget with a $1,000 Permanent Fund dividend that is the lowest in state history when adjusted for inflation.
Other major vetoes include about $27 million of $74 million for fire suppression and $10 million of $23 million for disaster relief. Also cut was $5.7 million for school maintenance, $5 million for the Alaska Seafood Marketing Institute, $3.8 million for behavioral health services and nearly $1.9 million for child care centers — in each case a significant portion of the total funding approved by the Legislature.
“The price of oil has gone down, therefore our revenue is going down, and basically we don’t have enough money to pay for all of our obligations,” Dunleavy said in a video posted on an official social media page Thursday. “So as a result of that you’re going to see some reductions in this year’s budget. It’s not an easy thing to do. It’s certainly not a fun thing to do, but it’s necessary. We don’t have the revenue to support the budgets that we receive from the Legislature (so) we have to make some hard decisions.”
The Democratic-led House majority, in a press release, state the veto of education funds by the Republican governor “virtually guarantees an attempt to override his veto, which will likely take place when the legislature returns to Juneau in January.”
“The Legislature worked hard to balance the budget in an era of lower oil prices,” House Speaker Bryce Edgmon (I- Dillingham) said in a prepared statement. “The governor’s vetoes today were unnecessary and disappointing, but not unexpected. On hopefully, what is soon to be an energy renaissance in Alaska, it was disheartening to see vetoes that reduced important services like education funding, child care, Medicaid and others that Alaskans and our workforce will depend upon.”
Oil prices were expected to average $70 a barrel for the coming fiscal year when Dunleavy unveiled his initial proposed budget in December that contained so-called “statutory” PFD of about $3,800 and a deficit of $1.5 billion — more than half the state’s total budget reserve fund at the time. That was down from $85.24 in fiscal 2024 and just below $74 projected for the current fiscal year.
A revenue forecast updated Thursday by the Alaska Department of Revenue projects prices of $64.23 for the coming fiscal year.
The drop in oil prices during the past several months has been largely blamed by analysts on economic uncertainties and recession predictions resulting from economic policies by President Donald Trump including widespread global tariffs. Legislatures during the session said they expect the state’s financial situation to be even worse during the coming year.
Dunleavy, in addition to the $51 million cut to per-student education funding, also took a separate action that strips $100 million from the $408 million Alaska Higher Education Investment Fund that provides college scholarships and grants.
The Legislature’s spending plan took $100 million from that fund and $100 million from the Alaska Industrial Development and Export Authority (the state’s investment bank) to cover a roughly $200 million shortfall in the current year’s budget. However, the governor rejected the use of AIDEA funds — declaring it was to preserve that money “for statutorily designated purposes” — resulting in all $200 million coming from the higher education fund.
That switch was the first of the governor’s actions singled out as notable by state Sen. Jesse Kiehl (D-Juneau), a member of the Senate Finance Committee who said AIDEA has $600 million in unobligated funds and there’s “no one else in all of state government that has that kind of loose cash lying around.”
“They spent it in unaccountable ways,” Kiehl said, referring to ongoing controversies about the entities financial practices and projects its funded. “So when you look at the needs of state government, when you look at the needs of Alaskans, that that’s only a sensible place to go.”
Education funding was one of the most contentious issues at the Capitol this year, with the Legislature on the last day of the session overriding a veto by Dunleavy of a bill increasing the $5,960 Base Student Allocation by $700. The governor’s line-item veto of part of those funds is a first for the BSA specified in state law — although vetoes of one-time funding have occurred before — and some legislators have questioned the legality of such an action.
A one-time BSA increase of $680 is in effect for the current fiscal year, meaning school districts will see a $180 per-student reduction in their funding for the coming year. The Legislature can override vetoes on budget items by a three-fourths vote of the 60 members, but since they are not scheduled to convene until January school districts are facing several months of reduced funding.
The Juneau Board of Education approved a budget for the coming year that presumes a $400 BSA increase.
While the governor’s veto does not reduce the BSA below that $400 level, JSD is still facing uncertainty about a proposed regulation change limiting local contribution to school funding. Hauser said they do not know if the regulation will pass, and if it does, when it will go into effect. Additionally, after the passage of HB57, Hauser said the $700 increase did not fully keep pace with inflation or the rising costs of delivering quality public education across Alaska.
• Contact Mark Sabbatini at mark.sabbatini@juneauempire.com or (907) 957-2306. Contact Jasz Garrett at jasz.garrett@juneauempire.com or (907) 723-9356.
