The state Legislature adjourns May 19, a little under three weeks away. That means the end-of-session crunch on bills and budget work is at hand.
This week the House Finance is finishing work on its version of the state operating budget and budget subcommittees in the Senate are finalizing their recommendations in anticipation of the House sending its version over in the next few days.
What has peoples’ attention, however, is the approximate $2 billion in new federal money headed to Alaska and how can be rolled into the budget. The hope is that at least parts of it can be approved before the May 19 adjournment.
It’s a daunting task because guidelines on how money can be used won’t be received from the U.S. Treasury until May 10, nine days before adjournment.
The House operating budget headed soon to the Senate includes the federal American Rescue Plan Act, or ARPA, money along with the normal state funds. It would appropriate 70 percent of $1.2 billion APRA provides as a discretionary grant to the state over the next two fiscal years, Fiscal Years 2022 and 2023, with the remaining 30 percent held for appropriation for FY 2024.
ARPA requires most of the money to be used by the end of 2024.
There are additional funds being provided in APRA that are non-discretionary for the state and must be passed along to entities named in the federal bill like school districts, municipalities and the University of Alaska. These are technically included in the state budget but the Legislature and governor basically have little control over those funds.
Spending plans for the $1.1 billion in discretionary federal ARPA funds in the House draft budget generally follow recommendations made earlier by Gov. Mike Dunleavy. These include, so far, revenue “replacement” (for lost revenues) to coastal communities for cruise passenger taxes they would have received in 2020 and that estimated to be lost this year. These are budgeted at $21.2 million for each of the years.
There is also revenue replacement to coastal communities for lost seafood tax income, at $2.1 million; $80 million in grants to local governments to replace lost 2020 revenues in 2020; $30 million for grants to small businesses and $30 million for grants to nonprofits; $10 million to the Alaska Travel Industry Association for tourism marketing and another $20 million to regional economic development organizations to promote the visitor industry.
The governor proposed $150 million for tourism marketing but only $30 million for tourism is in the House draft budget so far. It’s likely more will be added.
The governor has also proposed $325 million for infrastructure in the $1.1 billion in federal discretionary funding. Water and sewer are mentioned for part of this, which could go toward completing plumbed water and sewer or improved delivery systems for small rural communities still on the historic “honeybucket” system.
There is also a long list of rural community water and sewer systems built decades ago that need major upgrades or replacement.
The ARPA federal funding also includes $112.3 million for Alaska capital projects separate from the $1.1 billion state discretionary allocation. The Senate Finance Committee was told earlier this week that the state Office of Management of the Budget and the Legislative Finance Division have been in contact with U.S. Treasury officials on guidelines for using the capital allocation. These guidelines are also due May 10, but OMB and the Finance Division were told informally that the intended use for these funds are for broadband expansion.
There other mentions of broadband in funds designated for infrastructure within the state’s $1.1 billion in discretionary funds. Broadband is also prominently mentioned in a large “set-aside” within ARPA for Native American tribes nationwide. Alaska tribes will get part of this, although they must compete against tribes in other states for the competitive awards.
It is assumed these funds can be “leveraged,” with money combined from several sources, to fund large projects, and this could indicate a potential for a major expansion of broadband infrastructure in Alaska.
That could include terrestrial systems like the fiber-optic and microwave high-speed internet offered by GCI, Alaska Communications System and Quintillion, which has offshore fiber-optic cables off the northern and northwest Alaska coasts.
However, satellite operators One Web and Alaska-based Pacific Dataport will be offering competing satellite services.
Among the budget items from the non-discretionary pass-through funded by ARPA is $127 million for rent relief and housing through Alaska Housing Finance Corp.; $23.9 million for low-income home energy assistance; $30.8 million for the University of Alaska, with 50 percent to be shared with students, most likely through tuition assistance, and $358.7 million to school districts.
The money for school districts will be held by the state Department of Education and Early Development and released in increments to school districts.