Governor Dunleavy Signs FY2026 Budget: Vetoes Reflect Reduced Revenue Outlook

After weeks of uncertainty, especially regarding education funding, Governor Mike Dunleavy signed the Fiscal Year 2026 budget for the State of Alaska on June 12, 2025. After the vetoes, which totaled $122 million, the state budget amounts to $14.7 billion.

In a press release from the Governor’s office, the Spring Revenue Forecast had projected $68 per barrel oil in FY2026. However, market dynamics have changed since March, and the state has experienced lower oil prices, and oil price outlooks continue to fluctuate. In an updated revenue outlook, the Alaska Department of Revenue projects general fund revenue to possibly be $222 million lower than was projected in the Spring Revenue Forecast.

Among his vetoes, the sharpest was felt on education, which included eliminating the Base Student Allocation (BSA) funding formula that many school districts around the state use when building their budgets, with a cut is more than $50 million. In the weeks prior to his signing the budget, the unknown BSA amount has led the Matanuska-Susitna Borough School District (MSBSD) to propose several versions of its own budget, as the Governor vetoed a previous education spending bill that had set the BSA at $1000. The last budget the MSBSD had approved last week had estimated the BSA to be $700.

This marks the first time that Alaska has failed to fully fund the education formula.

Another education veto Dunleavy made had to do with budget language that was meant to prevent surplus spending from the state’s Higher Education Investment Fund, used to help fund graduating high school scholarships from the state. Instead, Governor Dunleavy has taken funds from it, instead of the Alaska Industrial Development and Export Authority.

Earlier in the day, Governor Dunleavy posted a video to social media stating that cuts were going to be made, saying that as the oil situation has deteriorated, leading to the price of oil decreasing, the state’s revenue is going down.

“Basically, we don’t have enough money to pay for all of our obligations. So, as a result of that, you’re going to see some reductions in this year’s budget,” he said. “It’s not an easy thing to do. It’s certainly not a fun thing to do, but it’s necessary."

Governor Dunleavy said that when his administration saw the revenue deteriorating during the past spring, they reduced their ‘ask’ in the budget by over $200 million, “as part of the solution to the problem,” while every line of the budget was scrutinized.

“We’re going to make sure that those things that are absolutely necessary will be in the budget. And those things that we can live without, at least for a little while, will probably be removed.”

During the brief video, the Governor said that with the price of oil going forward remains uncertain, decisions needed to be made now, adding that if the revenue picture improves, some items cut from the budget could be added back in.

“Once we get a better idea of what the price of oil is going to be, and (what) our revenue picture is, we can make adjustments in a supplemental budget next January with the legislature.”

He concluded the video saying he takes the budget process seriously and any decision made on the budget is not done “flippantly,” but with thinking and concern and analysis on the state’s revenue.

“We take any reduction seriously. We know that the budget affects all Alaskans-whether it’s public safety, whether its schools, whether it’s Health and Human Services-we understand that.”