Senate passes largest budget* in state history, backed by high oil prices and dipping into savings

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There are many ways to judge the size of the state budget.

Are we including the dividend, are we just talking about the unrestricted amount of the general fund that it spends, or are we bringing in all the federal dollars? Well, by just about every one of those metrics, the budget passed by the Senate on Tuesday is at or near the top of each of those categories.

When you rack up the windfall of federal dollars from the covid relief bills and the federal infrastructure bill, it sits at the top of the list with a whopping $19 billion outlay. When you look at the amount of unrestricted general funds that it spends – that’s how I’ve generally looked at budgets because it gives us a better view of what the state brings in and spends on its own – the budget is located fifth after adjusting for inflation.

With a big dividend and plenty of capital spending to go around — including $280 million added Tuesday to pay for the Port of Nome, Port of Alaska (in Anchorage) and Mat-Su road projects — no more attempts to put money away in savings for years to come or any future funding for K-12 education. The legislation still maintains some sort of “expenditure limit” with provisions that direct that any oil revenue over $100 a barrel be deposited into the constitutionally protected corpus of the Alaska Permanent Fund, meaning at unless future draws might be a bit larger. What this means, however, is that the Senate budget has a deficit of about $970 million, despite high oil prices and the federal windfall, which needs to be made up with savings.

Senate budget officials have warned that such a budget would put the state in an incredibly precarious position where any downward pressure on oil prices could be catastrophic. Senator Stedman noted that if oil drops to around $94 a barrel it will deplete the state’s statutory budget reserve and if it falls into the $70 range it will also wipe out the state’s constitutional budget reserve. and will leave no other recourse than the overdraft of Alaska. Permanent fund.

“I can’t consider myself a good steward of Alaskans’ money if we’re tapping into savings at $100 a barrel,” said Democratic Juneau Sen. Jesse Kiehl.

Conservative senators who have been staunch supporters of a bigger PFD have brushed off fears that the budget will decimate the state’s fiscal position, arguing that it’s just a one-time budget (election year ), that the state still has a lot of money in the Alaska Permanent Fund and not everyone followed the rules on the dividend, so why follow rules to limit spending? There were few efforts to cut spending and most pitted the dividend against funding for K-12 education, fisheries research or other social safety net spending. . Even if one of them had been accepted, it would have been only a fraction of a fraction of the expense.

Sen. Mike Shower, R-Wasilla, led the charge on overspending, arguing it would put the state on a solid footing in the future: “If not now, then when?”

The changes to the Senate, in total, are massive. Senator Stedman says changes on the floor — which include the big dividend, the energy rebate, spending on capital projects that vary from roads and ports to high school diving boards — have seen the budget go from a saving of $1.2 billion to about $1 billion in deficit spending. Sen. Natasha von Imhof, R-Anchorage, warned the spending would drag the state toward income taxes, deep cuts to state services and overdrafts from the Alaska Permanent Fund.

“What good is a high dividend if we don’t also have a balanced budget. There are consequences with the choices made today on this floor and yesterday. The choice to liquidate the Treasury on a hope and prayer that oil prices remain high has consequences. … Negotiating a billion-dollar high dividend means other things go unfunded. The irony is that this is one of the highest collective budgets in history, I checked on our break, and is backed by so-called ‘fiscal conservatives’,” she said. “I speak today on behalf of Alaskans who are thinking beyond the next election cycle. I will not support this flawed budget.

Stedman said he hopes for the best for future lawmakers.

“God bless them,” he said, “and hopefully they can increase the savings and move the state forward and not put us in a position where we start to liquidate the permanent fund.”

The budget now heads to the House for a vote of approval. Senators expect the House to reject the budget, sending it to a conference committee to iron out differences, but there are fears the House could simply approve the budget, effectively leaving any further changes to Gov. Mike Dunleavy and his veto pen. .

Follow the thread: The Senate summarizes the amendments and votes the budget.

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