Gov. Mike Dunleavy signed state operating and capital budgets for the coming year on Tuesday that include an estimated $3,200 Permanent Fund dividend and $400 million in line-item vetoes to the spending plans approved by the Alaska Legislature, with deferred maintenance projects and pension funding among the biggest cuts.
The $12.3 billion budget for Fiscal Year 2023 is 14% higher than Fiscal Year 2019, Dunleavy’s first year in office, but during a news conference the governor said spending for all state agencies except public safety and education are reduced by 10 percent compared to four years ago. He said it also increases the Constitutional Budget Reserve to about $3 billion, up from $1.3 billion, which is “enough to cover the state budget if oil prices collapse.”
“This budget pays a historic PFD, puts a lot of money into savings, takes a lot of things off the books, improves our debt rating and invests in the things that the public believes it should,” he said. “Our view is this is a responsible budget given our current situation with our revenue from oil.”
Dunleavy claims the budget has a nearly $1.9 billion surplus based on expected revenues of about $14.2 billion for the fiscal year ending June 30.
Major line items approved by the Legislature and retained by Dunleavy include $1.2 billion in forward funding for K-12 education extending into 2024. He also kept $221 million in deferred school bond debt reimbursement from the past five years for municipalities, $16 million of which Juneau’s leaders are counting on to balance the city’s budget for the coming year.
“We hope that results to some degree in tax relief for taxpayers in our municipalities,” Dunleavy said.
The budget is the beneficiary of skyrocketing oil prices, which some analysts predict could again top $120 a barrel this week and rise significantly more if international strife continues. But prices are also highly volatile and the governor’s office, in a supplemental email after the press conference, noted some of the most-proclaimed budget items may fall by the wayside if prices fall.
“At $103.25 a barrel there would be no deposit to the CBR, but (we would) still fully forward funding K-12,” the email notes. “At $89 a barrel we would no longer forward fund education, but it would still balance the budget.”
The Permanent Fund dividend was the most contentious budget item during this year’s legislative session, with the Senate at one point proposing a $4,200 dividend payment — based on the state’s statutory formula set in law, but not followed by lawmakers since 2016 — plus an energy relief payment of $1,300.
Ultimately the Legislature approved a dividend of about $2,550 — based on a so-called 50-50 payment that divides the annual transfer from the Alaska Permanent Fund equally between state services and dividends — plus a $650 energy relief payment.
Dunleavy, while noting the estimated $3,200 total dividend payment in the signed budget is less than he sought, repeatedly emphasized its record size during the press conference. Others asked to speak during the event also referred to how it will assist residents facing skyrocketing fuel prices, inflation and other costs.
“A $3,200 Permanent Fund dividend for people across the state sells a lot of beer, so that’s good for us,” said Matt Tomter, owner of the Matanuska Brewing Co. “But I think the important thing is that is money for you as Alaskans.”
Democratic legislative leaders, while expressing opposition to various line-item vetoes, issued a statement shortly after the news conference requesting the dividend be issued immediately to residents instead of the traditional period in October. The payments were issued on July 1 in 2020 due to the COVID-19 pandemic.
“Alaskans are preparing for the hunting and fishing seasons now,” Sen. Bill Wielechowski, D-Anchorage, said. “With gas prices at nearly $6 per gallon in urban areas, Alaskans need relief now to help access these vital resources – whether for sport fishing or subsistence. The precedent is there to issue the dividend early, and we should provide Alaskans with the means sooner so they can take advantage of Alaska’s resources.”
Other budget differences aside, Dunleavy did little to discourage his intentions about early dividend payments going into election season when asked about it.
“That’s a decision we’re going to probably make in the next week to let people know how that money is going to be distributed and when,” he said.
The actual amount of the dividend, whenever it is paid, will be determined as always by the Alaska Permanent Fund Corporation.
Dunleavy, highlighting education and public safety during the press conference, said the budget provides $117 million in education funds for programs such as the Alaska Reads Act, an intervention program aimed at ensuring all students can read at grade level by the end of the third grade. He also touted $57 million in one-time funds to schools, replacing the K-12 school in the K-12 public school in Napakiak, and “the first operating budget increase in several years” for the University of Alaska.
Among the public safety items the governor highlighted are authorizing 10 new Alaska State and Wildlife Troopers and 10 Village Public Safety Officer positions, and new housing for public safety officers in rural communities.
Not shockingly, a different spin was offered by some of Dunleavy’s opponents including former Gov. Bill Walker, who is running as an independent candidate in seeking to regain his seat in this fall’s election.
“While the State of Alaska is experiencing a boom in revenue associated with high oil prices and an influx of federal infrastructure money, Dunleavy made cuts to K-12 schools, the University of Alaska, the court system, funding that would support seniors and people with disabilities, and overdue maintenance for infrastructure around the state that would create good jobs,” Walker said in a prepared statement. “Dunleavy could not find a single cut in his own office’s budget while he was swinging a hatchet everywhere else.”
Democratic candidate Les Gara, a former state House member, stated in a series of Twitter messages Dunleavy’s “PFD promise has been false all along.”
“He’s never proposed a way to fund it without war money,” Gara wrote.
In a subsequent tweet he stated: “the bigger story on #Akgov’s vetoes is that next year we go back to ’non-election year Dunleavy.’ Without Russian blood money next year he’ll be back to a job-killing construction budget that keeps people out of work, (a quarter) billion in school cuts and no future.”
The final budget contains 73 listed line-item vetoes totaling about $763 million from all funding sources. Among the largest items are $62.5 million for school maintenance, $27 million in deferred maintenance for the University of Alaska and $22.5 million in state facility deferred maintenance, plus additional individual maintenance projects such as $6.2 million for repairs at Mt. Edgecumbe High School.
Dunleavy said “we have a considerable amount of money put into the maintenance funds, millions of dollars” and while the state does have a current windfall due to high oil prices he is exercising caution.
“We also want to make sure we’re holding back enough money to make sure that if oil does drop — it doesn’t always go up, it sometimes goes down — we have enough money in savings to continue to maintain and keep running government,” he said.
Also vetoed is $89.3 million in extra contributions to state retirement trust funds. A top “administration official” participating in an on-the-record “background” call with reporters after the press conference said the veto reduces the payment to the amount approved by the Alaska Retirement Management Board.
“One thing that happened over the course of last year was pension funds earned a considerable amount of money,” the official said, adding the Legislature approved the extra funds even though the management board declared they weren’t needed to meet obligations.
Retention bonuses and recruiting funds for state employees were the subject of numerous line-item vetoes. Dunleavy said “there are other means through bills that were passed to be able to pay those folks.”
“You will see raises for some of our folks,” he said.
In some instances, such as coping with a shortage of Alaska Marine Highway employees, the state is facing the same problem as private companies and governments nationwide, Dunleavy said.
“The Alaska Marine Highway is benefiting this year from a federal grant from the infrastructure bill passed at the federal level,” Neil Steininger, the governor’s budget director, said during the press conference. “We know we’re be receiving enough money to run the maximum schedule possible with the condition they’re in.”
Among the other line-item vetoes by Dunleavy (with comments by “administration officials” participating in the background call):
■ $5 million for the Alaska Seafood Marketing Institute. A budget official said ASME received $7 million in COVID-19 relief funds last year, about half of which remains, and “we think with their normal base budget they really don’t need that supplement funding.“
■ $1.5 million for public broadcasting. “We’ve been pretty consistent on this piece over the years,” an official said, adding that while emergency services have been funded, stations have access to other sources of money and “we just haven’t seen this as a core service of government.”
■ $4.3 million for a Food Bank of Alaska food box pilot program. “There are a lot of items related to agricultural support and food security,” an administration official said. “We looked at which of them would be most impacted.”