The Alaska Senate is preparing a state spending plan that includes a smaller Permanent Fund dividend and a diminished funding increase for public schools to balance Alaska’s annual operating budget without spending from savings or breaking a limit on spending from the Alaska Permanent Fund.
When operating budget debates begin Wednesday in the Senate Finance Committee, the proposal under discussion will include a Permanent Fund dividend of about $1,300 and a $500 increase to the state’s per-student funding amount, the base student allocation, senators said during a news conference Tuesday.
“We’re going to live within our revenue stream this year, which means something has to give,” said Sen. Bert Stedman, R-Sitka and co-chair of the finance committee.
Both figures are smaller than ones approved earlier this month by the Alaska House of Representatives in a draft budget that covers state services for the 12 months beginning July 1.
The House proposal included a dividend of about $2,700 and a $680 increase to the base student allocation. Combined with other parts of the budget, that resulted in a deficit of about $600 million.
Stedman said the Senate isn’t willing to accept that deficit.
He said senators’ preferred approach would have lawmakers pass a balanced budget, then reassess the state’s financial situation in January or February. If oil prices are higher than forecast, resulting in extra revenue, legislators next year could pass a supplemental budget that includes extra money for priorities.
“We can revisit the capital budget to add projects if need be, or funds to schools, or what have you,” Stedman said.
As of Tuesday afternoon, the budget schedule calls for the Senate Finance Committee to debate the proposal and consider amendments this week before sending it to a vote of the full Senate next week.
The Senate’s idea would return to the House after that. If House lawmakers agree with the Senate budget, it would go to Gov. Mike Dunleavy.
Otherwise, the House and Senate ideas would be subject to negotiation into a final compromise plan. Those negotiations could be difficult.
Rep. Kevin McCabe, R-Big Lake, is a member of the House majority caucus and said Tuesday that the amount of the dividend in the House budget was already a compromise for him — he prefers a higher figure. A figure like the Senate’s would be “very difficult for me,” he said.
Rep. Dan Ortiz, I-Ketchikan, is among the sponsors of legislation that would permanently increase the state’s per-student funding for public schools. His bill proposes a $680 per-student, per-year increase, with another $120 added next year.
He said he’s “disappointed” with the increase proposed by the Senate, which would count for only one year, but added, “it’s a negotiation process.”
Rep. Cliff Groh, D-Anchorage, said he “contests the framing” that has the budget being a push-pull between cuts and spending from savings.
Legislators could instead raise new revenue, he said. This year, members of the Legislature have proposed more than a dozen tax proposals, including changes to the state oil production tax, a statewide sales tax, and a statewide income tax.
In addition to the bills that have already been introduced, Gov. Mike Dunleavy is expected to offer another sales tax proposal before the end of the regular session.
Passage of any one item would change the equation in the Legislature, but none have advanced to a vote of the full House or the full Senate, and there are only three weeks left in the regular legislative session.
“Here we are, 22 days left to go, and it’s going to be hard for us to move a tax bill across House and Senate in that amount of time,” Senate President Gary Stevens, R-Kodiak, said on Tuesday.
Members of the House majority added that they aren’t likely to approve a new tax unless it’s part of a broader long-term state fiscal plan that includes other legislation, adding to the difficulty.
“We’re not going to get that fiscal plan between now and the next two and a half weeks. I don’t see it happening,” Ortiz said.
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