The borough and Wrangell schools could receive about $4.5 million in state funds, and individuals could receive a fall dividend at least more than double the amount of last year’s payment as the Legislature is in the final day of its regular session on Wednesday.
High oil prices — $50 per barrel above a year ago — have added billions to state revenues and made it easier for legislators to add money to the budget for schools, local public works projects and the annual Permanent Fund dividend.
The Legislature faces a midnight Wednesday adjournment deadline to finish its work. If House and Senate members are unable to negotiate compromises on spending bills and other remaining items, they could call themselves back to work or the governor could call them into special session.
As of Monday, the biggest political and financial issue on the budget table was the amount of the dividend. The House had approved a $1,300 PFD and an energy relief payment to Alaskans at the same amount, resulting in about $2,600 for residents at a cost of around $1.6 billion to the state treasury.
The Senate plan called for a $4,200 PFD, plus the energy relief check of $1,300, for a combined payment to residents of $5,500 this fall, at a cost of about $3.6 billion, possibly draining all of the state’s savings accounts except the Permanent Fund if oil prices drop back toward the long-term average in the next year.
Last year’s dividend was $1,114, under the $1,300 average of the past decade.
While House and Senate members were struggling to agree on the amount of the dividend in the session’s final days, there appeared little dispute over a $4.1 million state grant to help the borough pay for a new water treatment plant. The community priority was in both the House and Senate versions of the public works budget, called the capital budget, though other spending items were in dispute and the bill was not finished as of Monday.
The 25-year-old water plant has been an operating problem for years, with a high buildup of sediment affecting water quality, flow and treatment costs. A new plant, estimated at more than $15 million, would include a new filtration system. The borough already has about $11 million in federal funds to put toward the project.
Wrangell also looks likely to receive around $150,000 in additional one-time state funding for the school district, to help the schools avoid further cuts to staff and services.
The state covers about 60% of the district’s operating budget under a formula based on enrollment. But the funding formula has not changed since 2017, while costs have increased and Wrangell has lost enrollment. Though several lawmakers argued for an increase in the funding formula, they lacked the votes to win passage and legislators compromised on a one-time appropriation to help local districts for the 2022-2023 school year.
The House approved $57 million; the Senate was at $60 million; the two chambers will negotiate their different numbers this week.
All the oil money also has prompted a Senate plan to make good on several years when the Legislature and governors short-funded the state’s reimbursement responsibility to municipalities which had borrowed to build or remodel schools, with the anticipation that the state would cover much of the debt payments as required by law. Low oil prices and budget deficits drove the decision to cut funding those years.
Wrangell could receive close to $300,000 under the Senate plan to pay back municipalities across Alaska for years of short-funding the state’s share of local school construction bond debt. The big winners in the plan, which totals nearly $200 million, would be Anchorage and the Matanuska-Susitna Borough, which have borrowed heavily for new and remodeled schools.
Whether the back payments are made to municipalities — and how much they will be — are subject to House-Senate budget negotiations.
The biggest drama of the final week of the session was the battle over this year’s Permanent Fund dividend. After the Senate amended the budget to supercharge the PFD and energy relief check to $5,500 on a 10-9 vote, the House was confronted with the politically contentious challenge of accepting the Senate number or rejecting it and forcing a conference committee on the budget.
The joint conference committee started work on Sunday, after the House voted 18-22 on Saturday to reject the Senate version of the spending bill.
Critics of the measure, which over the weekend included labor, education and business groups, expressed concern over the reliance on high oil prices to pay the bills. Educators also worried that spending so much on PFDs would leave the state treasury unable to “pre-fund” education for the 2023-2024 school year.
Most legislators generally support fully funding the state’s contribution to school district operating budgets a year in advance to avoid the risk and uncertainty to education programs.
“We must balance the needs with the wants,” Fairbanks Rep. Bart LeBon said during House budget debate over the PFD on Saturday. He voted not to accept the Senate numbers. “I get it that there’s needs and wants. … We need to support roads, troopers, public education.”
LeBon is one of three House members named to the budget conference committee, along with Rep. Dan Ortiz, who represents Ketchikan and Wrangell. Anchorage Rep. Kelly Merrick, House Finance co-chair, will lead the group.
Senate members on the committee include Senate Finance Co-Chair Bert Stedman, of Sitka, whose district includes Wrangell.
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