Governor introduces $5.2 billion state spending plan for next year, down 5%

Gov. Mike Dunleavy introduced what is basically a maintenance state budget for the state’ Fiscal Year 2026, the budget year that begins July 1. The budget is required to be submitted by Dec. 15 but Dunleavy has traditionally released the proposed spending plan a few days early, as he did this year.

The state Department of Revenue also released its revenue forecast for FY 2025, which underpins the governor’s budget.

As he has done in the past, Dunleavy has proposed a “full” Permanent Fund Dividend, or PFD, paid to citizens of $3,892 per recipient. This follows a formula in state law that dates from the 1980s and sets out how the dividend is calculated.

The formula is considered obsolete, however, and the Legislature typically appropriates an amount for the PFD that can be afforded. In recent years the actual PFD has been about half, or less, than what the governor has proposed.

In total, the governor’s plan proposes $5.21 billion in undesignated general fund expenditures, or UGF. These are funds that are at the discretion of the Legislature and are not tied to specific program obligations. In comparison, $5.49 billion in UGF funds are being spent in the current fiscal year, so the governor’s proposal represents a 5% reduction.

The governor’s proposal calls for $282.4 million for state-funded construction, a 15% drop from $330 million appropriated in the current year. The bulk of state-managed construction is paid for by the federal government, but the state must provide a match, which is in the state capital budget. The amount for the state capital budget is typically changed by the Legislature, usually upward.

State legislators must approve the governor’s budget in time for his final signature before July 1, the start of FY 2026. The appropriation amounts for specific programs and projects usually change as the Legislature’ finance committees make changes, but the governor has the final say over the budget amounts though his line-item veto powet/

Key items in the Governor’s FY2026 Proposed Budget Include:

Public Safety:

• $2.4 million to establish a Talkeetna State Trooper Post to ensure law enforcement coverage of Willow, Talkeetna and Trapper Creek along the Northern Parks Highway Corridor

• $1.3 million to hire three new Alaska State Trooper Investigators to investigate Child Crimes Investigations in Kotzebue, Nome, and the Northwest Arctic

• $1.2 million to hire five additional Village Public Safety Officers, bringing the total to 90 VPSO positions. In 2020, there were only 40 VPSOs serving rural Alaska villages.

• $6.5 million to purchase a Pilatus PC-12 aircraft for emergency rural response across Alaska

• $1.5 million for Alaska Housing Finance Corp.’s “Empowering Choice” voucher program for victims of domestic violence

• General funds deposited into the Disaster Relief Fund for response to disasters Thie was $15 million in FY202, the current year, and $13 million proposed in FY2026)

Education

• Total investment in K-12 Education, $1.5 billion

• $1.1 billion in K-12 Foundation Formula, which encompasses the Base Student Allocation funding and $67.8 million for Pupil Transportation, or school buses

• $2.75 million in continued support for Career and Technical Education, teacher apprenticeships, and teacher recruitment and retention initiatives

• $300,000 for a Electrician and Plumber career pathway development for students

• $5 million for the University of Alaska Fairbanks toward achieving R1 Status, to attract additional research fundung

Energy Development

• $50 million for advancing the AK LNG Project Phase 1 to construction*

• $6.5 million for the completion of engineering, design, permitting, and geological studies for the Bradley Lake Hydropower Dixon Diversion Project

• $6.3 million for Alaska Energy Authority Renewable Energy Project Grants

• $5 million for Alaska Housing Finance Corporation Energy Weatherization Programs (Utilizing federal funds and funds from the AHFC Dividend)

Transportation

• $4.2 million for improvements along the Copper River Highway and development of the Wood River Canyon Bridges and Trails

• $2.5 million for Dalton Highway Heavy Maintenance milepost 76-89

• $18.1 million for Alaska West Coast Resiliency Projects for damage to infrastructure caused by Typhoon Merbok ($14.5 million federal, $3.6 million State funds)

• $500,000 for Alaska DOT&PF Right-of-Way clearing of vacated homeless encampments

Resources

• $5.6 million initiating a Gulf of Alaska Chinook salmon marine harvest study

• $800,000 to continue the Alaska Marine Salmon Program to obtain critical marine research in the Bering Sea and Gulf of Alaska

• $858,000 to develop forest infrastructure for increased timber sales in Southeast Alaska

• $10 million for the Alaska Seafood Marketing Institute to invest over three years to market Alaska’s seafood*

Affordability

• $11.5 million for the Alaska Housing Finance Corporation Rural Professional Housing Program ($10.5 million AHFC Dividend, $500,000 other, $500,000 federal)

• $10.1 million for the Alaska Housing Finance Corporation Homeless Assistance Program ($9.2 million AHFC Dividend, $950,000 other)

• $6 million to implement expanded eligibility of the Child Care Assistance Program implementing SB 189

• $3 million for the Point Mackenzie Correctional Farm Produce Processing Plant

• $3 million for the University of Alaska Fairbanks – Agriculture and Food Systems for Alaska’s Economic Sustainability

*Introduced as a FY2025 supplemental