The Alaska Senate Finance Committee has introduced a new version of the state operating budget, shrinking the size of the Permanent Fund dividend from what the House had proposed in order to avoid a deficit.

The committee’s draft budget takes a more conservative approach to uncertainty around the state’s revenue forecast for next year — driven by rising oil prices due to the Iran war — than the budget passed by the House earlier this month.

Senate budget writers reduced the size of the dividend from $1,500 per recipient — the figure approved by the House earlier this month — to $1,000, equal to last year’s payout.

However, they added a potential $150 energy relief payment, to be paid along with the dividend if revenue from the current fiscal year is available to cover the additional $100 million expenditure.

The Senate’s proposed dividend would cost the state $300 million less than the outlay approved by the House, eliminating the deficit in the spending plan for the fiscal year that begins July 1.

The Senate Finance Committee could make additional changes to the spending plan this week before sending it to the full chamber for consideration.

After the full Senate votes on the budget, the House will have the choice of accepting the Senate changes or sending the budget to a conference committee to negotiate the differences before the adjournment deadline of May 20.

The committee also reduced the size of the budget by eliminating one-time funding of $158 million for K-12 schools in the House version of the bill. In its place, the Senate is looking to divert up to $100 million in unexpected oil revenue from the current fiscal year to give school districts some financial help.

The payment will go to school districts only if oil prices — which have been driven up by the war in Iran — remain at or above projections made by the Alaska Department of Revenue last month.

Revenue officials projected last month that North Slope crude would average $91 per barrel between March and July. In reality, the price averaged $101 per barrel between the beginning of March and April 17.

Higher oil prices bring in more tax and royalty revenue to the state treasury.

If oil prices remain at the $91-per-barrel average through the end of the fiscal year, that would translate to $84 million in funding for school districts. If the price averages $95 per barrel, districts will receive the maximum $100 million allotment. The final figure won’t be known until the end of August, after the school year has begun for most students.

Additionally, the budget includes $29 million in energy relief funding for schools. Each district’s share of the payment will be calculated based on the amount they spend on fuel, ensuring that rural village schools get a larger share of the funding to account for higher energy costs.

The Senate version of the budget doubles the amount appropriated to disaster relief from $24 million to $48 million, in part to address anticipated expenses associated with the fall 2025 storms in Western Alaska. It also increased funding for fire suppression from $47 million to $60 million to bring the figure closer to the recent annual cost of wildland firefighting.