Senate releases its version of the state budget

The state Senate introduced its version of the state operating budget Monday, and as expected the state agency portion of the budget is somewhat lower than in the House version of the budget.

But when items not yet included are added, such as payments to oil explorers on tax credits for past investments, the final Senate budget will probably be close to the House version and may even be a bit higher, Sen. Bert Stedman, cochair of the Senate Finance Committee said in a briefing last week.

The budget being worked on is for Fiscal Year 2020, the state financial year that begins July 1. The Senate spending plan cuts $192.58 million from the current FY 2019 budget and is $81.8 million lower than the House proposal, although not all spending has been included yet.

Both the House and the Senate have rejected Gov. Mike Dunleavy’s deep budget cuts, but Dunleavy can still use his veto authority to reduce spending after the Legislature gavels out in mid-May.

The budget bill introduced Monday includes recommendations from the Senate agency budget subcommittees that have been meeting for several weeks. Included in those recommendations is that the state Division of Agriculture, which is in Palmer, be left intact. The governor had proposed shutting the division down and moving many of its functions to Anchorage.

The Senate bill also contains a provision that keeps an inspection service for dairy farms in the Department of Environmental Conservation. The House took a similar position in its budget. The governor has proposed eliminating the inspections, which would cause the dairy, which is in the Matanuska-Susitna Borough, to shut down.

The Senate did follow the governor, but did not cut as deeply, on reductions to the Department of Health and Social Services, mostly in Medicaid, and in the Department of Transportation and Public Facilities, mostly for the state ferry system.

In the DOTPF budget, Dunleavy wants to end state ferry service between October and next June. The Senate wants to allow a limited winter service so that coastal communities can get supplies.

In Health and Social Services, Dunleavy would cut spending by $308 million from the current year budget for the department. The Senate would cut the current budget by $142.4 million.

The House and Senate both rejected the governor’s big cut to the University of Alaska. The governor wants to trim the university’s current $327 million budget (of state funds) to $193.1 million, a $134 million reduction.

The House, in its budget, cut the university $10 million and the Senate even less, $5 million. Unlike other state entities the Legislature does not make detailed appropriation levels for university programs but rather gives the UA regents a lump sum and allows them to allocate the funds.

It is possible that the governor may veto the spending plan ultimately approved by the House and Senate back down to his target level. But the Legislature has a card to play, too, even if the necessary three-quarters vote cannot be mustered for a veto override.

Like the House, the Senate did not include the Permanent Fund Dividend in its budget bill, Stedman said Monday.

That means the PFD is likely to be put in a separate bill, or at least added later to the budget bill. It will be a point in the negotiations with the governor over the budget.

Only the Legislature can pass an appropriation, in this case for the PFD. If Dunleavy vetoes the budget passed by the House and Senate back to the size he wants, the Legislature could simply withhold approval of the PFD and there will be nothing the governor can do.

Dunleavy campaigned on a $3,000 PFD but to have enough money for that the budget would have to be cut $1.6 billion, which he has proposed. A smaller PFD would leave more money available for public services like education.

The House version of the budget, which cuts about $200 million from current-year spending, would leave enough for a $1,200 dividend, House Speaker Bryce Edgmon said.

Basically, the governor and the Legislature will have to strike a deal between spending and the size of the PFD. Both have cards to play, the veto for the governor and the authorization for the PFD for the Legislature.

The Senate spending plan cuts $192.58 million from the current FY 2019 budget and is $81.8 million lower than the House proposal, although not all spending has been included yet.