JUNEAU — The Alaska House’s budget is stuck, with disagreements on the size of the Permanent Fund dividend, school funding and the size of the budget itself.
The House Finance Committee last week advanced its draft budget with a statutory PFD and a $1.9 billion deficit. The spending plan was set to be debated on the House floor this week. But leadership of the Democrat-dominated House majority say they will not send an unbalanced budget to the Senate.
“I’m really reaching out to the minority. Let’s negotiate,” said House Speaker Bryce Edgmon, a Dillingham independent, at a Tuesday media conference. “Let’s talk about some things that we can do to make ends meet in a way that doesn’t eviscerate basic services.”
Legislators are facing a $680 million deficit over two fiscal years based on status quo spending. That assumes lawmakers approve a roughly $1,400 dividend and a $174 million school funding boost.
However, some members of the Legislature have supported a larger school funding increase: over $250 million per year to pay for a $1,000 boost to the $5,960 Base Student Allocation, the state’s per-student funding formula. Advocates have said that is desperately needed for a public school system in crisis.
To pay for that, some lawmakers have supported a smaller, $1,000 dividend to free up state revenue.
The nonpartisan Legislative Finance Division has estimated that with a $1,000 BSA boost and a $1,000 dividend, the House’s budget for the next fiscal year would still be roughly $167 million in deficit.
Anchorage Democratic Rep. Andy Josephson, a co-chair of the House Finance Committee, said Tuesday that the House majority was committed to the $1,000 BSA boost.
“We heard from scores of Anchorage citizens about the importance of that, and we have their back,” he said, referring to a packed town hall meeting over the weekend. “Come hell or high water. We’re going to stand for that principle,” he said.
Alaska Republican Gov. Mike Dunleavy in December proposed a budget with a statutory dividend following the 1982 statutory formula. If approved, eligible Alaskans would receive a roughly $3,900 dividend this year. But a statutory PFD would also lead to a roughly $1.9 billion deficit.
The House’s draft budget currently contains a statutory PFD at a cost of $2.5 billion — by far the largest outlay in the spending plan.
The last time the Legislature approved a statutory PFD was 2016. Since then, legislators have determined the size of the dividend through the budget-making process.
The House majority has a one-seat margin, which effectively gives each member a veto over the budget. The caucus is split on the dividend, meaning Republican minority members will likely be needed to help pass the budget, and to draw from savings to fill the current fiscal year’s shortfall.
”We’re all in a pickle,” Edgmon said Tuesday. “It’s not just the House majority. It’s the House minority, it’s the governor, it’s the Senate majority, it’s the Senate minority. We all own the situation in front of us.”
The House’s budget process has been marked by acrimony and finger-pointing between the majority and the all-Republican minority. Leadership of both caucuses have not articulated clear plans for how they want to balance the budget.
Anchorage GOP Rep. Mia Costello, the House minority leader, suggested at a separate Tuesday media conference that the minority has been largely shut out from budget debates.
“We are willing to be a part of the conversation, and we want to move forward, and we’re not often given that opportunity,” she said.
Anchorage Republican Rep. Chuck Kopp, the House majority leader, countered that the minority needs to come to the table.
“We need a House minority that’s willing to step up, take some very hard votes and agree that you can’t duck the question on the size of the dividend. It’s like rearranging the deck chairs on the Titanic when you’re going down,” he said.
The Senate majority has introduced revenue measures to bridge the state’s deficit, including by raising oil taxes. But those measures appear to face long odds of passing through the narrowly divided House.
Adding to the fiscal uncertainty for lawmakers: Congress has signaled it could make deep cuts to programs such as Medicaid. Additionally, President Donald Trump’s announcement of sweeping tariffs on U.S. trading partners has sent the Permanent Fund and oil prices sliding, which could balloon the state’s deficit further.
Lawmakers have few good options to reduce the deficit and balance the budget.
Fairbanks GOP Rep. Will Stapp, a minority member, said Tuesday that both the statutory PFD and the $1,000 BSA boost would need to be reduced. Palmer Republican Rep. DeLena Johnson suggested recent budget additions should be pulled back.
But, when pressed on Tuesday, House majority and minority members did not offer specifics about how to reduce the deficit beyond generalities about budget cuts and working together.
Typically, the House takes the lead on the annual operating budget, which funds state agencies and programs, and the Senate takes the lead on the capital budget, which funds infrastructure and maintenance projects. The spending plans are then exchanged and legislators finish work on the other chamber’s budgets.
The House and Senate had planned on exchanging budget bills on April 11. But that is being delayed with the House at a standstill.
Josephson, who manages the House’s operating budget, said Tuesday that the majority caucus anticipated the budget being on the House floor next week. That is typically the final step before legislation advances to the Senate for its consideration.
Dunleavy has been all but absent this year from the state Capitol and legislative debates. Edgmon urged the governor’s office and his Senate and House colleagues to work together.
“We’ll get through this, but if you leave us to our own designs, we are going to be stuck in this morass that unfortunately is going to carry forward into what none of us want — that’s a special session,” he said.