The Alaska House of Representatives on Wednesday approved a $6.2 billion draft state operating budget, putting Alaska on track for a significant deficit in the fiscal year that begins July 1.
If Wednesday’s draft is added to a capital budget draft passed Tuesday by the Senate and a planned supplemental budget needed to fix a deficit in the current fiscal year, total general-purpose spending is near $6.6 billion.
Meanwhile, the Alaska Department of Revenue expects $6.1 billion in general-purpose revenue during the upcoming fiscal year. The House is proposing to spend from the Constitutional Budget Reserve, the state’s main savings account, to balance the budget.
“This is the best our body can do right now,” said House Majority Leader Chuck Kopp, R-Anchorage.
Kopp went on to say that the House-passed budget is preliminary and subject to change by the Senate.
An earlier version of the House budget included $2.5 billion for the 2025 Permanent Fund dividend, enough to pay almost $3,900 to every recipient. To reduce the size of the expected deficit, the House voted to cut PFD spending to $950 million, a payout of about $1,400 per recipient.
“Some may argue that we should cut the fat. What fat is there? We are at the bone,” said Rep. Andy Josephson, D-Anchorage and co-chair of the House Finance Committee.
The one major increase in the budget is an $86 million increase to K-12 public school funding, equivalent to a one-time $1,000 increase to the base student allocation, core of the state’s per-student funding formula.
Last year, lawmakers approved a one-time $680 increase to the BSA.
“I want to celebrate today … this is a pro-growth budget that puts our state on a path toward prosperity,” said Rep. Zack Fields, D-Anchorage.
Wednesday’s vote fell along caucus lines, as all 21 members of the House’s coalition majority — 2 Republicans, 5 independents and 14 Democrats — voted in favor of the budget draft.
All 19 members of the House’s Republican minority voted against it, with some citing the deficit.
“This budget is a bunch of lofty promises. That’s what’s so heartbreaking about it, because everybody here knows they will not be kept,” said Rep. Sarah Vance, R-Homer and a member of the minority.
Vance and other members of the minority said the budget is unsustainable because it relies on spending from savings. Even if the CBR — which contains $2.8 billion — is sufficient to cover this year’s deficit, it may not be enough to cover next year’s projected gap, which is expected to be worse.
“This budget makes promises it can’t keep,” said Rep. DeLena Johnson, R-Palmer and a member of the minority.
“It will probably be the other body that takes on the responsibility that we have given up,” she said, referring to the Senate.
Senate leaders have said throughout the session that their aim is to pass a budget without drawing from savings.
“We’ve got to balance the budget without a CBR draw for this year and prepare for next year,” said Sen. Bert Stedman, R-Sitka and co-chair of the Senate Finance Committee, in a Tuesday news conference with reporters.
Over the next fiscal year, the Alaska Department of Revenue expects North Slope oil prices to average $68 per barrel. That’s significantly lower than the current year and would reduce the amount of revenue available to the state.
“To the fundamental core question: Can the Senate balance the budget at $68? The answer is yes. Is it going to be fun, without any difficult decisions? No,” Stedman said.
Asked where the Senate’s cuts will be, Stedman said that remains to be determined.
“Everything’s in play,” he said.