Alaska legislators concluded this year’s session with a budget that, on paper, has a small surplus. However, it was no cause for celebration, as legislators said they fully expect the buffer to be erased with oil prices once again on track to be well below state forecasts.
Rosier-than-realistic oil projections have been a fact of life for the state in recent years, forcing legislators to pass supplemental budgets to clean up larger-than-expected deficits in the spring. That was the case this year, as lower-than-expected oil prices are expected to create a roughly $200 million deficit in the current year’s budget, which runs until June 30.
Typically, legislators would reach into savings accounts to cover the deficit, and that was the plan this year.
But House Republicans, who had approved the current year’s budget when they were in the majority last year and largely expected a deficit, blocked the draw on the final day of the legislative session. Legislators needed 30 votes in the House to draw money from the Constitutional Budget Reserve (CBR). Just 22 voted for the draw, with all but one Dunleavy-aligned Republican voting against the measure.
Republicans complained that they were somehow being “extorted” into voting to balance a budget that they helped craft. Others insisted they believed in Dunleavy’s plan to balance the budget, which Dunleavy and his allies have yet to actually detail publicly.
That means the state will fall back on other accounts to cover the anticipated deficit.
In the budget bill, legislators included a plan to draw $100 million from the state investment bank, the Alaska Industrial Development and Export Authority, and the remainder from the Alaska Higher Education Fund, which is used to fund state scholarships and other education-related expenditures. That amounts to about one-sixth of AIDEA’s funds and about a quarter of the Higher Education Fund.
Legislators in both the House and Senate Majorities expressed frustration after the vote, noting that there wasn’t anything underhanded about the request to balance a budget that has already been approved.
“They were foolishly stubborn,” House Finance Committee co-chair Rep. Andy Josephson said in an interview with The Alaska Current, noting that enough minority Republicans in the Senate voted in favor of the draw. “There was no reason not to vote for the draw. There was nothing to begrudge. No pet projects. No slush funds. No personal wins for any legislator. It was debt, red ink, and obligated dollars.”
Sen. Bert Stedman, the co-chair of the Senate Finance Committee, said in a post-session news conference that it was unfortunate that the House Minority Republicans voted that way, as it put other funds at risk when the CBR is available to fill deficits.
“We have to pay our bills, it’s not up for negotiations,” he said. “I wish I didn’t have to pay my mortgage, but I don’t think the banker would put up with that.”
Josephson noted that AIDEA has faced increased scrutiny from legislators in recent years over its questionable performance and investment decisions. That includes a recent report that cast serious doubt on the agency’s job claims. Legislators have considered cutting its funding through other means this session, but those efforts stopped short. Still, Josephson noted that Gov. Mike Dunleavy could veto the portion of the fallback language that draws money out of AIDEA and instead draws it entirely from the Higher Education Fund.
The impact on both AIDEA’s operations and the state’s scholarship program under either scenario isn’t immediately clear.
Senate President Gary Stevens also acknowledged that possibility during the post-session news conference, adding that if it comes to that, then legislators will look to refill the account next year.
“It’s borrowed money, it’s not given,” he said.
The budget has been transmitted to Gov. Dunleavy, who has until June 19 to either veto or line-item veto the 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 Bluesky.
