With Legislature in final days lawmakers rush to finish budget, other required work

The state Legislature is in its final days before a required adjournment at midnight, May 21. Lawmakers in Juneau are racing to finish work on actions they’re required to do by law, including voting to confirm Gov. Mike Dunleavy’s nominations for state boards and commissions.

The state budget must also be agreed on, both for operations and capital, which is mostly construction. On Monday the Senate Finance Committee was set to approve its version of the state operating and mental health program budgets in House Bill 53 and House Bill 55, which passed the state House previously.

Meanwhile, the House Finance Committee is finishing its review of the state capital budget, in Senate Bill 57, which passed the Senate previously.

Both the operating and capital budgets are thin, given the state’s financial situation and crude oil prices continuing to decline, which means lower revenues for the budget the Legislature is in the final throes of completing. The Permanent Fund Dividend will be lower than the $1,765 paid out in checks last year. The operating budget passed by the House had the PFD at $1,400 but the Senate Finance Committee reduced it to $1,000 in its effort to have a balanced budget and not draw down state savings.

Sens. Lyman Hoffman, D-Bethel, and Bert Stedman, R-Sitka, warn that the state’s budget situation may be worse in the 2026 legislative session because of lower oil prices, President Donald Trump’s cuts to federal programs and higher prices caused by the president’s tariffs on imported goods.

Because of that, drawing this year on the state’s Constitutional Budget Reserve, now at about $2.8 billion, will be unwise because the money from the CBR may be sorely needed next year, Hoffman and Stedman said during budget hearings.

Meanwhile, the only new revenue bill considered likely to pass this session is a new corporate income tax on out-of-state digital businesses which sell to Alaskans via the internet. It is in Senate Bill 113. Two bills that would increase taxes on oil producers are likely to be held until next year.

Despite the gloom over budgets, some positive news is that with money scarce legislators have had more time to focus on policy issues. An important health care bill moving through the Senate and House are bills that would speed health insurers’ authorizations for medical procedures. It’s possible, or even likely, that Senate Bill 113 may be passed before the Legislature adjourns. The bill solves an important problem in addressing delays by insurance companies in giving approvals for payment, creating problems for health providers and anxiety for patients.

There are also bills moving that would bring in new mechanisms for financing affordable multi-family housing that is badly needed. They are House Bill 184 and Senate Bill 14, by Sen. Forrest Dunbar, D-Anch. Both bills are likely to be held until the 2026 legislative session so that technical work can be done over the interim.

Lack of affordable Alaska housing has become a crisis in Alaska. “The housing shortage is stifling economic growth and community stability,” Michelle Brown, with the nonprofit Housing Alaskans, told the Senate Finane Committee. Businesses cannot grow because of lack of housing their employees can afford, she said.

“Developers are stymied because the cost of construction and of acquiring capital are so high they cannot pencil projects for what people can afford.” Brown said communities are unable to attract public safety operators, health care workers, and teachers. Rep. Rebecca Himschoot, I-Sitka, commented that a three-bedroom unit rents for $3,000 a month in Sitka and with utilities the cost rises to $3,700 monthly.

The legislation, active in both the House and Senate, provides new options for financing of multi-unit housing, or five or more units that could be for apartments or condominiums. The Senate bill, SB 14, by Sen. Forrest Dunbar, D-Anch., is in the Senate Finance Committee with a hearing held May 1. HB 184, the House version sponsored by Rep. Andi Story, D-Juneau, has had hearings in the House Community and Regional Affairs Committee.

Under SB 14 and HB 184 the Alaska Industrial Development Export Authority, or AIDEA, would be authorized to engage in the financing of housing. The bills as yet don’t specify how this is to be done but committee discussion so far is that it would be done in partnerships with banks or other private sector participants. AIDEA’s long-standing commercial real estate loan participation program done in partnerships with private banks could be a model.

In this program, which is very successful, AIDEA partners with banks who work with developers. A bank originates the loan, working with a developer, and brings the loan to AIDEA to become a partner. SB 14 and HB 184 refer to “workforce housing” but the term is not limiting. Any multi-unit dwelling could be eligible, the sponsors say.

There is also no definition of “workforce” in the Senate bill but the House bill, HB 184, defines it in terms of income: People placed in housing, either renting or purchasing, must have incomes at120% of the median household income in a given region and pay no more than 30% of that on housing. This is a standard framework for moderate income definition used in U.S. Housing and Urban Development programs.

However, that standard may be unrealistic, the House committee was told, because even with the limits the price of rents or condo purchases may be beyond what is realistically affordable for many people. The House committee may tinker with these limits and Sen. Dunbar, the Senate sponsor, is reportedly open to a change.

Dunbar told the Senate Finance Committee that he left the structure of an AIDEA program loose so as to create maximum flexibility in designing financing programs. However, there were objections on this from committee members Sens. Bert Stedman, R-Sitka, and Jesse Kiehl, D-Juneau, who want to have the structure better defined. This is now likely to be done this summer, with the legislation positioned well to move through in 2026.

Another housing bill pending is House Bill 13, by Rep. Andrew Gray, D-Anch., which would expand municipalities’ ability to reduce property taxes for new housing. The bill is now in House Rules Committee. Because there is no similar bill in the Senate there will not be enough time to steer HB 13 through to passage this year, but it is positioned well for next year.