This is a developing story.
A state budget for next year with a “full” Permanent Fund Dividend, no increase to the per-student education funding formula and a deficit of about $1 billion was proposed by Gov. Mike Dunleavy during a press conference Thursday.
The budget is similar in many aspects to his budget for the current year, which was rejected by the bipartisan state Senate majority that prevailed in a budget battle that resulted in drastically lower PFDs, a temporary increase in per-student funding and a small budget surplus.
[Governor says proposed budget will be released Thursday, funds for new ferry will be included]
Dunleavy emphasized his budget is subject to negotiation with the Legislature, noting his PFD proposal is based on what’s currently in statute. Also, he said, while there’s no current proposed increase in the per-student formula “that doesn’t mean there won’t be.”
Also, he said more funding is being provided for other areas of education such as homeschooling.
Leaders with the Senate majority, in a press release following Dunleavy’s press conference, called his budget a “starting point” toward a final spending plan.
“As we start digging into this year’s operating budget, our focus will continue to be a balanced budget without having to dip into our significantly low reserves,” said Sen. Bert Stedman, a Sitka Republican who as co-chair of the Senate Finance Committee played a central role in crafting the deal for the current year’s budget. “It’s our job to allocate resources wisely while addressing the needs of our communities. As always, this will be a deep and long process to make sound budget decisions that benefit everyone we serve.”
There are no cuts in any areas to this year’s budget compared to last year, Dunleavy said. That aspect of the proposal was met with a limited degree of approval by state Sen. Jesse Kiehl, a Juneau Democrat also on the Senate Finance Committee, in an interview Thursday.
“I was glad to see that the governor doesn’t have deep cuts proposed,” Kiehl said. However, “with the cost of everything going up a flat budget is a small cut of everything. And so we have some work to do to adjust that budget.”
Also, Kiehl said, “I was glad to see on the most basic level there are some more investments in things like payroll and getting the checks out on time. The things that you just have to do, they have to work.”
Dunleavy said the total budget of $13.9 billion, including all federal and state revenue sources, has a budget deficit of $987 million — based on the official fall revenue forecast for the state also released Thursday — which would be covered by the Constitution Budget Reserve and Statutory Budget Reserve.
A PFD of $3,429 is forecast for next year based on about $2.3 billion in fund earnings being available. While comparable numbers were in the budget Dunleavy proposed last year, the budget passed by the Legislature and signed by Dunleavy allocated about $880 million that resulted in a PFD of $1,312.
Dunleavy, in addition to citing a constitutional obligation to propose a so-called “statutory” PFD next year, cited inflation as a reason for the larger amount.
“Since 2020 the inflationary rate is probably close to 20%, the cumulative inflation over time,” he said. “It’s taking a bite out of everybody’s pocketbook. So we’re hoping that we can keep the PFD as high as possible to help Alaskans afford groceries, afford fuel, et cetera.”
The biggest budget issue during the past session, besides the PFD, was the education funding formula known as the Base Student Allocation. The permanent rate of $5,960 has been unchanged since 2017 except for a $30 increase approved in 2022, which education officials say has resulted in a huge loss of actual funds due to the same inflation referred to by Dunleavy.
The Legislature passed a one-time increase of $680 during the past session — about half of what was reportedly needed to offset the effects of inflation since 2017 — but Dunleavy vetoed half of the increase when he signed the budget in late June.
Dunleavy, on Thursday, said part of his plan for increasing education spending includes more funding for charter schools and homeschooling, as well as offering public school teachers incentive bonuses of $5,000 to $15,000 that he proposed during the session earlier this year.
“We’ve heard for decades ‘we need more money, we need more money, we need more money,’ — where do we need more money?” he said. “We need money in the classroom…We need teachers to be able to say ‘I want to go to Alaska. I want to come here and stay in Alaska.’”
Disappointment with the flat funding of the BSA was expressed in a statement by the Alaska Council of School Administrators.
“Despite the persistent efforts of educators, parents, families, and advocates across the state, the budget announcement falls far short of addressing the critical needs of our public education system,” the statement notes. “The decision not to allocate additional funds comes at a time when schools are grappling with unprecedented challenges, including the ongoing effects of the global pandemic, national educator shortage, the impact of high inflation, and the urgent need for resources to support Alaska’s students and educators alike.”
Kiehl said he had a discussion about education policy with the governor about a month and a half ago that may be indicative of what lies ahead during next year’s session.
“I made very clear that education funding is a priority of mine high priority, he made very clear that some of his education bills will be a very high priority of his,” he said. “And neither one of us slammed the door on the other.”
Dunleavy’s budget technically includes $23 million in matching funds to secure $92 million in federal funds to replace the Tustumena ferry — a request highlighted by U.S. Sen. Lisa Murkowski last week — but the allocation is “using Federal toll credits,” according to a statement by the governor’s office. Dunleavy proposed a similar first-ever effort at such matching funds last year, even though the legality of doing so has not yet been established for the Alaska Marine Highway System.
The updated Department of Revenue forecast projects oil prices will average $82.39 per barrel for the current 2024 fiscal year, above the $73 a barrel forecast as necessary for the budget to balance when the Legislature approved it in May. That means Alaskans receiving PFDs this year could get a supplemental payment of up to $500 in 2024. Oil prices are expected to average $76 for the 2025 fiscal year and decline beyond that, stabilizing at $70 by fiscal 2033.
A 10-year plan released with the budget paints a grim picture, with the state running out of reserve funds within two years and being about $10.6 billion in debt by fiscal 2034 — not counting the Alaska Permanent Fund which as of Thursday was worth about $77 billion, most of which is constitutionally protected from being spent by lawmakers. Dunleavy emphasized throughout the press conference aggressive and quick resource development of oil and other natural resources will be key in avoiding such future debts.
“I would say that every legislator and every person in the state of Alaska should be saying ‘yes’ to as many projects as possible,” he said.
Other items highlighted by the governor’s office include:
• $2.5 million for statewide PFAS fleetwide equipment foam replacement.
• $2 million to continue “statehood defense” efforts involving multiple agencies.
• A supplemental allocation for the current fiscal year to hire 30 full-time eligibility technicians within the Department of Health to process Supplemental Nutrition Assistance Program (SNAP) applications, which as of last week had a backlog of more than 12,000 new and renewal applicants.
• About $5 million for food banks and food pantries statewide. Of that $3 million is supplemental funding for the current fiscal year and the remaining for the next fiscal year.
• Contact Mark Sabbatini at mark.sabbatini@juneauempire.com or (907) 957-2306.
