Legislators will focus the next few weeks on how to spend $1.02 billion in federal pandemic relief destined for the state treasury, with last week's opening acts of the fiscal play showing somewhat different budgetary scripts from the House majority coalition and the governor.
Both proposals would direct money to construction projects, the tourism industry and repairing Alaska's damaged economy, though at differing funding levels. The House plan also would direct funds to communities worst hit by the pandemic.
And while House leadership has proposed appropriating about 70% of the federal funds in this year's budget, and saving the rest for next year, Gov. Mike Dunleavy's plan also would stretch out the spending but does not specify how much should be held back for next year.
Senate President Peter Micciche said his colleagues would prefer to hold back half the money for next year, when available state funds to balance the budget will be just as tight.
The federal legislation gives state and local governments until December 2024 to spend the funds.
The House Finance Committee is scheduled to work all this week on the state operating budget for the fiscal year that starts July 1.
Legislators face a May 19 constitutional deadline to adjourn unless they can round up enough votes to extend their work or the governor calls them into special session.
Lawmakers are waiting on official federal guidance to explain more precisely how the money can be spent - which may not come before May 10 - putting Alaska in a bit of a calendar squeeze to finish their budget decisions.
The House majority plan for the federal aid, unveiled last Friday, proposes to spend about $700 million this session from the $1.02 billion. Much of that money would be used to replace state dollars in the budget, freeing up state general fund money to pay for a $230 million capital budget - used to fund construction and renovation projects - which would be Alaska's largest budget works budget in years.
The proposal allocates $80 million of the state's federal funding for municipal governments. That would be in addition to the $230 million in direct federal aid going to Alaska communities under the $1.9 trillion American Rescue Plan signed into law last month.
Local school districts are in line to receive their own federal assistance under a $358 million education allocation going to the state.
An additional $400 million-plus is coming to Alaska for housing assistance, COVID-19 response efforts, public health programs, child care, university aid and other programs targeted in the federal legislation.
The provision in the House plan to divert $80 million of the state allocation to municipalities is in response to communities, particularly in Southeast, hit hard by the loss of tourists. Local officials have told lawmakers that the separate federal allocation for their cities and boroughs is not sufficient to cover the loss of tax revenues to their municipal budgets, and they have asked the state to share its money to make up the difference.
Wrangell expects to receive about $500,000 as its share of the direct federal aid to municipalities, with the school district estimating it will get about $700,000.
The House plan also proposes $30 million for nonprofit organizations, $30 million in grants to small businesses, $20 million for local economic development organizations to promote tourism and $10 million for a marketing effort managed by the Alaska Travel Industry Association.
And by using the federal dollars to replace state dollars in the budget, the House majority proposal would set aside $175 million for a larger Permanent Fund dividend than the state treasury could otherwise afford this year.
The plan must be approved by the Senate and the governor before becoming law, and Dunleavy could veto elements of the plan.
The governor's own plan for spending the federal aid, unveiled a week before the House majority plan, would direct $150 million for Alaska tourism, calling it a "revitalization" effort; $325 million in assistance to businesses and organizations hit by pandemic restrictions, calling it "economic recovery and innovation;" and $325 million for construction projects, including water, sewer and broadband projects.
Meanwhile, other issues many lawmakers saw heading into this year's session as critical to address - such as Alaska's long-running budget deficit and a new formula for calculating the annual Permanent Fund dividend - have been overshadowed by the large amount of federal money coming to the state.
Though some lawmakers previously said the influx of federal aid should not be seen as an excuse to delay tough decisions to protect the state's financial future, there is no work nearing completion in the House or Senate on any tax or other significant revenue legislation.
Lawmakers continue talking about changing the 40-year-old formula to calculate the dividend, but they lack consensus on how or what to change.
Much of the discussion in the final weeks will focus on how to spend the federal aid.
Anchorage Rep. Sara Rasmussen, a member of the House Finance Committee, said the Legislature wants more control over how the state spends the federal dollars. Lawmakers last year, rushing to finish their work early amid escalating COVID-19 concerns, essentially rubber-stamped plans offered by the Dunleavy administration.
Micciche and House Speaker Louise Stutes, who met with Dunleavy on April 20, said there is a general agreement that the federal money will not be used to permanently increase the size of the budget.
In recent years, debate over the size of the dividend has been a dominant issue as lawmakers have relied heavily on Permanent Fund earnings - long used only to pay dividends - to also fund public services amid low oil revenue.
Micciche said the federal aid has taken away some momentum from efforts to seek a long-term solution to the state's fiscal dilemmas. "I mean, politicians, fundamentally, if you can avoid the tough decisions, that's what many people want to do," he said.
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