Alaska lawmakers announce a budget compromise. But will the governor sign it?

The Alaska Legislature approved a bipartisan budget deal Tuesday, sending Gov. Bill Walker a compromise that reverses proposed cuts to schools and the university system and averts the Wednesday mailing of layoff warnings to state employees.

But the plan plugs a yawning $3.2 billion budget hole with an $8 billion state savings account with no promises to fill the gap with taxes or a replumbing of the Alaska Permanent Fund. Legislative leaders instead offered vague assurances that they'd consider Walker's deficit-reduction proposals during the rest of a special session that he convened last week.

"We'll take up all the other issues as best we can," said House Speaker Mike Chenault, R-Nikiski, at a news conference after his chamber passed the budget by a 34-5 vote. But, he added: "I can't guarantee any bill will pass."

The budget approved by the Legislature on Tuesday is $4.26 billion, with significant cuts across state agencies that reduce spending sharply from the $5.1 billion spending plan for the current fiscal year, which ends June 30.

But the $4.26 billion includes just $30 million in cash subsidies for oil and gas companies, which are projected at $775 million. Lawmakers are proposing to cover another $430 million in subsidies by retroactively putting money in the current year's budget — and those payments will only come if the Legislature passes Walker's oil tax reform measure that's still under debate.

A spokeswoman for Walker, meanwhile, wouldn't say Tuesday whether the governor plans to sign the budget deal — a move that could dramatically reduce his leverage to get lawmakers to approve broader financial reforms.

His proposals include a restructuring of the Permanent Fund to spin off billions of dollars in annual revenue to help pay for state services, plus reforms to Alaska's oil tax regime and a range of taxes, like a new tax on personal income.


Walker told lawmakers in March that a replumbing of the Permanent Fund, plus a broad-based tax, "must happen in 2016" along with spending cuts. And he's said that Alaskans' future dividend checks will be imperiled in the next few years without a structural budget fix.

Walker has scheduled a news conference Wednesday morning to address the proposed budget deal.

Legislative leaders described Tuesday's compromise as a collaborative effort between the Republican-led majorities in the House and Senate and the Democratic minority in the House, which had failed to produce a budget deal in a regular session that was extended for a full month beyond its scheduled 90 days.

Votes from all three caucuses were needed to cover the budget deficit from the $8 billion state savings account, the Constitutional Budget Reserve — which requires a three-fourths majority in both the Senate and House to access.

The deal emerged after a 9:30 p.m. committee meeting Monday, to which Rep. Les Gara, D-Anchorage, showed up in a T-shirt. Lawmakers were scrambling to approve the budget before Wednesday to stop Walker's administration from sending out 30-day layoff warnings to state employees, who face a government shutdown if a budget isn't adopted by July 1.

"We are going to take up the governor's bills and we are going to advance them to the floor," Sen. Anna MacKinnon, R-Eagle River, said at the Monday evening committee meeting. "But we need to take care of those that provide services for Alaskans that are in need."

To win votes from the House Democrats, GOP lawmakers agreed to reverse a range of steep budget cuts they'd proposed. The spending plan approved Tuesday fully funds the state's per-student funding formula for education next year, abandoning a last-minute proposal to cancel a planned $50-per-student increase at a cost of about $13 million.

Lawmakers also funded the state university system at $335 million — still $15 million below the current year, but $35 million more than what GOP leaders were proposing.

Still looming, however, is debate over the structural budget reforms proposed by Walker that could reduce the $3.2 billion deficit that remains, which stems from a crash in the price of oil combined with long-term production declines. And on Tuesday, legislative leaders in both chambers weren't committing to giving all the proposals an up-or-down vote.

Asked how much of the budget gap lawmakers wanted to close, MacKinnon, co-chair of the Senate Finance Committee, said each legislator "has their own mark," and was unwilling to specify her own figure.

"I think a third, a half, all of it — it just depends on who you are and where you're at in this process," she said at a news conference. "I can't control anything that any other chairman or any other legislator does with any of these bills. What I can do as a chairman is make sure to engage Alaskans in the consequences and the opportunities and the politics."

Nathaniel Herz

Nathaniel Herz is an Anchorage-based journalist. He’s been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at natherz.substack.com