The Alaska Senate approves draft budget and confirms $175 million in bonus funding for public schools

The Alaska Senate on Wednesday approved a $12.25 billion draft state budget, finalizing legislative plans to provide public schools with a one-time $175 million funding boost.

The Senate’s proposed Permanent Fund dividend is approximately $1,580 per recipient, including an estimated $222 in energy assistance. That’s less than the $2,270 figure included in a competing bill passed by the House of Representatives, and the final figure will be subject to further debate.

The smaller amount reduces the risk that the state will spend less savings.

“We live within our means. This is what it looks like,” said Sen. Bert Stedman, R-Sitka and co-chairman of the Senate Finance Committee.

Stedman said the budget will balance if the state’s oil production meets estimates and if North Slope oil prices average $78 per barrel between July 1, 2024 and June 30, 2025.

Oil and other sources of revenue would be enough to fund state operations, as well as new legislation and the state’s capital budget, which finance construction and renovation projects statewide.

Wednesday’s 17-3 vote, which follows the State House’s approval of its own draft operating budget, marks the final phase of the Alaska Legislature’s annual budget process, in which lawmakers negotiate a compromise between the two to design.

In places where the concepts match, the relevant item is final, except that Governor Mike Dunleavy has the ability to reduce or eliminate final items with his line item veto. He cannot enlarge them or add new ones.

On education, the Senate added a one-time increase of $680 to the state’s Base Student Allocation, the core of Alaska’s per-student funding formula.

That’s worth about $175 million statewide, and the same language is in the House of Representatives’ draft budget, making the item final except for the governor.

Last year, Dunleavy vetoed half of an identical one-time increase, but on Wednesday the governor indicated during a news conference with reporters that he should not repeat his veto.

“I’ve been telling people that I’m open to an increase,” Dunleavy said, “an increase in one-time funding, especially to help solve the inflation problems.”

The Senate budget also includes a House-passed plan to spend $5.2 million more on reading programs for students in kindergarten through third grade.

The senators included additional money for student transportation, something that would need to be negotiated with the House of Representatives, which did not include it.

Also subject to further negotiations is the addition of $11.9 million in education funding after the federal Department of Education warned that the state had underfunded some school districts during the COVID-19 pandemic.

The Senate is led by a supermajority of nine Democrats and eight Republicans, and Wednesday’s draft budget was authored by that supermajority.

Before the final vote, the three Republicans outside the majority submitted 21 amendments containing a variety of priorities, but all failed.

The most controversial amendments concerned the size of this year’s Permanent Fund dividend, which Stedman called “the focal point of most budgets.”

Sen. Mike Shower, R-Wasilla, proposed taking additional money from the Alaska Permanent Fund to increase the Senate’s proposed dividend to an amount above the House amount once the energy assistance payment is included.

Although much of the fund is constitutionally protected, lawmakers only need a simple majority to violate a law that limits spending from the fund’s earnings reserve, which contains money collected from the fund’s investments.

Shower said his proposed dividend is what was recommended by a bipartisan, bicameral working group and implied its passage could encourage work on a plan to balance the state’s finances over the long term.

He received support from Sen. Shelley Hughes, R-Palmer, who said, “If we were to implement this, we would be on the path to a fiscal plan.”

But a majority of other senators opposed the idea. Stedman said he believed the amendment would immediately create a billion-dollar deficit.

“I don’t think this is a sensible amendment,” he said.

Sen. Forrest Dunbar, D-Anchorage, said he would like to see bigger dividends, but so far the Legislature has not put forward other necessary components of the financial plan, including new state revenue.

Shower’s amendment failed, 6-14.

The House and Senate are expected to appoint lawmakers to a budget conference committee on Monday, which will begin work on a final budget bill.

The budget is typically the last item approved before the Legislature adjourns for the summer.