Alaska’s ongoing budget woes aren’t going to make things easy for legislators as they try to balance a wide range of priorities, from increased funding for public schools to critical infrastructure upgrades and general government services.
The Senate Finance Committee heard an update on the state’s fiscal predicament on Thursday, highlighting just how little wiggle room they’ll have when crafting the budget later this session. Simply put, Alaska lacks the revenue needed to maintain state government services, cover new expenses and leave enough buffer to cover unexpected revenue shortfalls or costs.
“We’ll have to, I guess, make a list of all our expenditures and try to prioritize what we’re going to do,” said Senate Finance Committee co-chair Sen. Bert Stedman, R-Sitka.
Some of those new expenses include about $240 million for the education bill passed this week, as much as $35 million to upgrade the state’s electrical grid, a new senior benefits bill at $23 million and $38 million to cover a shortfall in the Alaska Marine Highway System.
If all of those were included in the budget, the state would have just $55 million left over to cover unexpected costs like wildfire responses or dips in oil prices. And that’s only if the Legislature follows the most conservative approach to the dividend favored by the Senate, which would yield an estimated payout of $1,360 to eligible Alaskans.
Alaskans are also set to receive an estimated $175 energy relief payment due to a modest surplus in the current budget year.
The governor has proposed a full statutory dividend requiring the state to draw about $1 billion from its $2.8 billion savings account. The Senate has been steadfastly opposed to such a plan.
The presentation also highlighted many other expenses that the state will likely incur over the next year but aren’t currently included in the governor’s budget. That includes infrastructure maintenance, firefighting costs and other legislation that has yet to pass.
“Most of all legislation has a cost,” Stedman said, “And that’s challenging in the environment we have today.”
That will also make meeting Gov. Mike Dunleavy’s demands for a second education bill difficult.
In an hour-long news conference this week, Gov. Mike Dunleavy has promised to veto the education bill approved by legislators unless they pass a second bill containing his priorities. Among them is a controversial teacher bonus program estimated to cost between $55 million and $60 million per year for the next three years.
Even the governor acknowledged that the state was facing budget constraints, casting doubt over the funding of everything in the education bill.
“Are we going to be able to fund everything we want? I don’t think so,” he said. “Not with the income that we have right now.”
Legislators didn’t include the program in the education bill. Several questioned the program’s efficacy, noting that there’s little in the program to incentivize teachers to stay with their schools after receiving the bonus.
At the hearing, Finance co-chair Sen. Lyman Hoffman, D-Bethel, reiterated concerns over the cost.
“I don’t see where there would be room to address the bonuses given our current financial situation,” he said, noting the legislation passed with “overwhelming support.”
Sen. Stedman outlined plans for the Senate Finance Committee to continue to work on the budget with a hearing next week to explore potential cuts to free up additional breathing room. Meanwhile, the Republican-led House is beginning to put together its draft of the operating budget.
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Twitter.