As Alaska lawmakers confront a major budget deficit, disagreements over how to solve the problem appear likely to lead to a lower Permanent Fund dividend this fall and cuts to services, including public schools.
In public statements, members of the Alaska Senate’s majority caucus have said they oppose spending from savings to balance the budget and want to see new revenue bills instead.
Meanwhile, members of the state House and Gov. Mike Dunleavy have said they oppose new revenue bills and would prefer to spend from savings.
Those different positions leave only budget cuts — to public services and the dividend — as the way to balance the budget.
Falling oil prices add to the problem. Alaska North Slope crude was worth close to $90 a barrel a year ago but was down below $65 last week as global markets react to U.S.-instigated trade wars and fears of weakened economies.
“It’s still a very dynamic conversation right now. … We can clearly see we don’t have enough funds to pay for everything,” said Nikiski Rep. Bill Elam, a first-term member of the House Republican minority.
As it prepared its draft of the state’s operating budget, the Senate Finance Committee stripped out all spending increases proposed by the House in its draft budget and nixed most of the increases requested by Dunleavy.
Next on the chopping block was the dividend, set at $1,400 per recipient by the House. The Senate Finance Committee last week adopted a budget with a $1,000 dividend.
That reduction would save about $250 million from the House budget.
With the Legislature facing a May 21 adjournment deadline, the Senate has passed one revenue bill — modifying the state’s corporate income tax for big Internet companies like Amazon — and two others remain in committee.
On April 29, Senate Majority Leader Cathy Giessel, an Anchorage Republican, confirmed that the Senate will not pass its biggest revenue proposal this year, which would collect more money from the state’s oil production tax.
That leaves only a change to the taxation of privately held corporations like North Slope oil producer Hilcorp on the Senate docket.
Even if both bills were to pass the Legislature and gain Dunleavy’s approval, the combined gain to the state treasury would be the equivalent of less than $200 for each Permanent Fund dividend.
On top of that, the odds of the House passing and the governor allowing both revenue bills appear low.
Even if a bill were to pass the House and Senate, Dunleavy would still have to OK it.
“I told legislative leadership, I’m not interested in new taxes,” the governor told reporters during a news conference earlier this month.
As an alternative to cutting the dividend and services, the Legislature could unlock the Constitutional Budget Reserve (CBR), a $2.8 billion savings account. Lawmakers are already planning to do so in order to cover a $200 million shortfall in the current year’s budget.
But on April 29, members of the Senate’s majority caucus reiterated their opposition to the idea of drawing more out of savings for the budget year that starts July 1.
As bad as the state’s budget situation is this year, it’s likely to be worse next year, said Sitka Sen. Bert Stedman, co-chair of the Senate Finance Committee.
Between federal budget cuts and depressed oil prices, the problems that the state is facing now will be repeated next year, Stedman said.
“The problem is we don’t have any money. We’ve had to make serious cuts,” said Senate Majority Leader Sen. Cathy Giessel, an Anchorage Republican.
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