High oil prices paid the way for legislators to spend more money on public services and construction, a little more on schools and a payout to Alaskans this fall almost triple the amount of last year’s dividend.
Legislators and their constituents now wait to see if Gov. Mike Dunleavy decides to veto any of the spending for the fiscal year that starts July 1.
Lawmakers went home last week after a late-night session on the final day May 18, when they approved about $2.1 billion — one-quarter of all state general fund spending in the budget year — for a $3,200 payment to eligible Alaskans this fall.
The last-day budget deal also includes a one-time 5% increase in state funding for K-12 education, make-good state payments to municipalities on short-funded local school debt reimbursement of past years, and a capital budget that includes $4.1 million for a new water treatment plant in Wrangell.
Adding the state grant to $11 million in federal funds already on the books, the borough plans to go to bid in January on the estimated $15.4 million water treatment plant, Borough Manager Jeff Good said Friday. The hope is to complete the project by the end of 2023. The work will include a new filtration system for the 25-year-old facility.
Securing a state grant for the water project was the borough’s top legislative priority for the session.
Wrangell shares
in state make-good payment
on school debt reimbursement
The borough also will benefit from appropriations in the budget bill that direct about $221 million in state funds to municipalities across Alaska, making up for several years when the state short-funded its share of reimbursement on local bonds for school construction and maintenance projects.
Unless vetoed by the governor, Wrangell could gain about $300,000 for the municipal treasury as its share of the “back pay” in the budget. The money would go to the municipality, which owns the school buildings and paid the bond debt, not to the school district operating budget. There are no spending restrictions from the state on how municipalities might choose to spend the catch-up funds.
The school district, however, will receive about $143,000 more than expected from the state for the 2022-2023 school year. The budget bill waiting for the governor’s review includes a one-time payment of $57 million for school districts statewide, providing a 5% boost for next year in the state’s per-student funding allocation for school operating budgets.
The one-time money brings state funding to public schools for K-12 education to about $1.23 billion for the next fiscal year, the second-largest single spending category after the dividend.
Educators and many legislators pushed for a permanent increase this year in the K-12 funding formula, but had to settle for the one-year appropriation.
Supporters of increased state funding for schools did manage to win legislative approval of a 0.5% increase in the base student allocation starting with the 2023-2024 school year. That small increase, coming after no change in the formula since 2017, was inserted into a separate bill dealing with young students who are behind in their reading skills. It will raise the base allocation by $30 per pupil.
Payout to Alaskans
decided on final night
The major battle in the final days and hours of the legislative session last week was deciding on the amount of this fall’s payment to Alaskans.
The House earlier in the session had approved about $2,600 — half as the annual Permanent Fund dividend and half as a one-time energy relief payment to help people paying high costs for gasoline, diesel, marine and heating fuels. The Senate approved a $5,500 payment, calling it a $4,200 PFD and $1,300 for energy relief.
Lawmakers ended up with the $3,200 payment to Alaskans after a plan to make it $3,850 passed the Senate but failed to achieve enough votes in the House.
Last year’s PFD was $1,114. The 10-year average is around $1,300.
“The number we arrived at for the PFD is a reasonable number,” Ketchikan Rep. Dan Ortiz said of the $3,200. The eight-year veteran of the House said the $5,500 payment would have weakened the state’s finances and could have jeopardized public services, particularly if oil prices head back down next year. Ortiz also represents Wrangell.
The House fell one vote short of the three-quarters majority required to accept the $3,850 payout, which would have required withdrawing $420 million from the Constitutional Budget Reserve Fund. To guard against easy access, the fund requires a supermajority vote in both the House and Senate to make a withdrawal. House members voted 29-11 to draw out enough money to kick up the payout to $3,850, but 30 votes were needed.
Ortiz voted against the additional withdrawal from savings. Leaving the money in savings will help the state in future budgets to meet its obligations, he said in an interview with the Ketchikan Daily News.
House Minority Leader Cathy Tilton, a Wasilla Republican, said she felt “sorry for Alaskans” after the vote blocking the $3,850 payout. She said members of her Republican caucus wanted to try to get as much money as possible to Alaskans.
Gov. Mike Dunleavy, who had been pushing for at least a $3,700 dividend this year, announced the day after the Legislature adjourned that he would accept the $3,200 and not call lawmakers back into special session to try for a higher amount.
The governor has a few weeks to decide on any vetoes in the budget. At a press conference the day after the Legislature adjourned, he said he would look at where it might be possible to cut or reduce spending to allow more of Alaska’s oil-revenue windfall to go into savings.
The budget passed by the Legislature does not include a significant year-over-year increase to operating costs when accounting for inflation. But it does include hundreds of millions of dollars in capital projects, with the largest appropriations for the port in Anchorage, at $200 million, and a deep-draft port in Nome at $175 million.
Residents and businesses in Anchorage and the Matanuska-Susitna Borough are heavily dependent on the port and the region holds a majority of votes in the Legislature. Rep. Neil Foster, of Nome, is co-chair of the House Finance Committee.
This story includes reports from The Associated Press, Anchorage Daily News and Alaska Beacon.
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