House passes its operating budget, first step in next year’s state spending plan

The House passed its version of the state operating budget last Saturday, April 9, including major new spending for education, the state ferry system, tax credits owed oil and gas explorers, state support for local government school bond payments, and more.

It’s the first major step in the state budget process. The Senate must pass its version of the budget, a House-Senate conference committee will reconcile differences in the two spending plans. Finally, Gov. Mike Dunleavy will weigh in with his authority to make line-item vetoes.

In a separate budget action the Legislature will also pass a capital budget, mostly for construction. It will be larger this year because it will include money from the federal infrastructure bill.

The House-passed budget included funds for a special $1,300 “energy” Permanent Fund Dividend along with a $1,250 regular dividend, which means Alaskans eligible for the PFD will get combined a payment of $2,550 this year.

Dunleavy, who is running for reelection, is pushing for larger dividends that would total $3,750 this year.

The number for the PFD set by the House could change, however, because the state Senate must decide on a dividend amount that may be different in its version of the operating budget.

Assuming 640,000 Alaskans file for the dividend the total cost will be about $1.63 billion. The projected budget surpluses for FY 2022 and FY 2023 are $3.6 billion, thanks to high oil prices, but the 2022 PFDs, at the House level, would reduce this to $1.97 billion.

There were several attempts by Republicans in the state House to amend the budget to include a so-called “full” dividend, or one calculated using a 1980s-era statute that is still on the books but which most consider obsolete. That would have paid out much more money. The amendments were defeated, however.

The operating budget is complicated, however, by the failed vote on the effective date clause, which requires a two-thirds vote, or 27, of 60 House members. The motion to make the budget effective immediately on passage and signed by the governor got only 25 “yes” votes. Without this the budget becomes effective 90 days after the governor’s signature.

There must be an approved budget by July 1, or the government must shut down. Without the effective date clause vote the deadline for the 90-day clock to July 1 was April 1, and has already passed.

It’s not unusual for votes to be withheld as legislators apply leverage on other issues, such as a larger PFD, but being only two votes for 27 this will likely be resolved before a shutdown looms, probably as part of the House-Senate budget conference, where differing House and Senate budgets are reconciled.

There are good reasons why an extended delay may not happen this year. It’s an election year and there is still COVID-19 in the capitol building, which means legislators have big incentives to get the session completed by the 120th day constitutional limit, which is May 18.

Meanwhile, while there’s still a combined $1.97 billion surplus for this year and next there are many things where money is needed. For example, the governor’s $350 million-plus general obligation bond proposal that would fund several projects now seems in trouble in the Legislature.

Lawmakers will scramble to get as many of these projects as possible into the traditional Fiscal Year 2023 capital budget, which is still being developed. One priority, which is now in the bond bill, is $18.5 million needed to repair plumbing in two University of Alaska Fairbanks student dormitories. Also, it’s now known that $79.5 million will be needed as a state “match” to the $1 billion in funding made available for Alaska in the federal infrastructure bill.

Here are other features of the budget passed by the House:

• $1.2 billion will be spent for “forward funding” education, which will provide financial certainty for school districts.

• $395 million will be spent to restore the Higher Education Investment Fund, which funds both for merit scholarships and needs-based scholarship for Alaska college students

• The Alaska Marine Highway will be fully funded at $141 million, with $82 million of this coming from federal infrastructure funds. An additional $18 million will be put towards a new state ferry vessel

• $60 million will be use to pay unfunded portion of oil and gas tax credits that were not appropriated in FY22 due to the failed 3/4 CBR vote. $349 million will be spent to pay our obligation for this fiscal year

• $66 million will be spent to pay 50 percent of school bond debt support to municipalities and capital projects for rural schools outside municipalities obligated for Fiscal Year 2022, the current budget year ending June 30

. In addition, a $111 million was approved for school bond debt and rural schools in FY 2023, the budget year beginning July

• The WWAMI Medical Education Program will receive a two-year appropriation of $1.6 million, which will help Alaska students in medical schools and ultimately bring more health professionals to a larger number of Alaska communities. Alaskan students in WWAMI are required to return to Alaska and work in health care as a condition of the state financial support

• $2.5 million for Pre-K (pre-kindergarten) for two years, for a total of $5 million, giving children entering school a start in their learning, which will better prepare them for education

• $1.5 million for Public Broadcasting, in providing grants to rural public radio stations that serve 20,000 people or less. This serves a vital need in ensure communications during emergencies