After larger deal fails, state lawmakers propose payout of up to $3,850 per Alaskan

a group of men at a conference table
Sen. Bert Stedman, R-Sitka, presides over a meeting of the Alaska Legislature’s budget conference committee on Sunday, May 15, 2022, at the Alaska State Capitol in Juneau, Alaska. (Photo by James Brooks/Alaska Beacon)

A compromise state budget containing as much as $3,850 in Permanent Fund dividends and energy payments for each eligible Alaskan is heading to final votes on Wednesday, the last regular day of the Alaska Legislature.

A six-member committee completed work on the compromise budget late Tuesday, three days after the Alaska House failed to agree with a budget proposal passed by the Senate.

The compromise budget has been altered only slightly from the Senate’s version. Its biggest change: Instead of a payout of $5,500 per eligible Alaskan, the compromise offers $3,200. That would cost the state $2.1 billion.

Higher payout depends on draw from savings

That can be increased to $3,850 per recipient if three-quarters of the House and three-quarters of the Senate vote to fund the increase out of the Constitutional Budget Reserve, a key savings account. Doing so would cost $420 million.

Roughly $2,600 of the amount would be this year’s Permanent Fund dividend, with the remainder serving as compensation for high energy prices.

The fiscal year 2023 budget covers state spending from July 1, 2022, through June 30, 2023. Lawmakers have rolled most of the state’s various budget bills together, with the resulting document covering the cost of services, the dividend and the cost of various construction projects.

The preliminary total is $8.4 billion in undesignated general funds, a term that includes state taxes and the annual transfer from the Alaska Permanent Fund. 

That would be the 10th-largest budget since statehood, according to inflation-adjusted historical figures kept by the Legislative Finance Division. If federally funded and fee-funded programs are included, the budget will be near the largest in state history. 

Those figures are before any vetoes by Gov. Mike Dunleavy.

“I think we’ve got a good budget. It’s balanced, it’s got a good, healthy dividend, a lot of capital around the state to keep people working, and a lot of attention to education, both the university and K-12,” said Sen. Bert Stedman, R-Sitka, chair of the conference committee that wrote the compromise.

Budget would fund capital projects, new items

In addition to the per-person payouts, the budget includes:

• more than $200 million for the Port of Alaska in Anchorage
• more than $150 million for the Port of Nome;
• $57 million in one-time grants for K-12 schools;
• more than $300 million deposited into the constitutionally protected section of the Alaska Permanent Fund;
up to $409 million in tax credits to oil and gas companies and their financiers;
funding for a court settlement in which Gov. Mike Dunleavy was found personally liable for illegally firing two Alaska Psychiatric Institute doctors;
• about $400 million to recapitalize the investment fund that pays college scholarships and for the state’s equivalent of medical school;
• about $89 million toward the state’s unfunded pension debt;
• $2.5 million for pre-kindergarten programs;
• about $1 million to fund a feasibility study to determine whether the state should take over a major wetlands permitting program from the federal government.

If oil prices average $90 per barrel during the next fiscal year, the budget would balance without spending from savings, except for the extra money needed from the Constitutional Budget Reserve.

The state expects oil prices to average $101 per barrel during the next fiscal year. If that average comes true, the budget would also set aside about $750 million for K-12 funding in fiscal year 2024.

“Everybody’s going home with a win,” said Rep. Kelly Merrick, R-Anchorage, the lead House negotiator.

At average oil prices between $75 per barrel and $90 per barrel, the state’s statutory budget reserve would be used to fill the resulting deficit, and no extra money would be set aside for K-12 funding.

Below $75 per barrel, the Legislature would have to take a special vote next spring to spend additional money from the Constitutional Budget Reserve.

Both Stedman and Senate Minority Leader Tom Begich, D-Anchorage, said they believe they have enough votes to approve the higher payment — and the budget as a whole — in the Senate.

The situation is less certain in the House, where 13 of the 17 members of the House’s Republican minority voted in favor of the Senate’s $5,500 figure.

Vote that could repeat shutdown standoff remains uncertain

Last year, seeking a larger dividend, members of the minority withheld their votes on a technical provision that allows the budget to take effect at the start of the fiscal year.

The dispute was resolved with the creation of a special fiscal policy working group, but not until the minority had brought the state within days of a government shutdown.

The situation could recur if enough members of the minority withhold their votes again.

Rep. Bart LeBon, R-Fairbanks, was the House minority’s representative on the conference committee and said he doesn’t know what will happen.

House Minority Leader Cathy Tilton, R-Wasilla, said she does believe the House will vote to pass the budget but that a majority of the minority will vote no on both the budget and the effective date.

Pressed about the final result, she said, “I potentially think there are enough votes to pass the effective date.”

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