Alaska Legislature

Hold the cuts: Alaska House committee proposes flat budget as starting alternative to governor’s plan

JUNEAU — Members of the Alaska House Finance Committee have abandoned Gov. Mike Dunleavy’s proposed state operating budget and have introduced an alternative: A $10.45 billion proposal that keeps state spending relatively flat when compared to the $10.49 billion budget approved last year.

The revised budget plan erases most of the governor’s plans for cuts to K-12 education, the University of Alaska and the Alaska Marine Highway System. The governor had proposed those cuts in order to pay a larger Permanent Fund dividend using the traditional formula in state law.

The new House plan does not address the amount of the Permanent Fund dividend. House leaders envision keeping that topic until the end of the legislative session.

“Right now, our intent is to take care of the budget first and come back to the PFD amount later,” said Rep. Neal Foster, D-Nome and the finance committee chairman in charge of the state operating budget.

David Teal, director of the nonpartisan Legislative Finance Division, said that even though the dividend is not yet listed in the proposed budget, lawmakers have reserved “roughly $600 million” for it.

Given 625,000 applicants, that would be about $900 per person.

That figure could grow if legislators make additional cuts in the coming weeks, something seen as likely.

“This is the first step in a three-step process,” Foster said of Thursday’s action.

Lawmakers in the finance committee will consider amendments to this alternative proposal next week. In the second week of April, discussion will move to the full House before a vote of all House lawmakers. After that, the resulting proposal will go to the Senate.

“Those are proposals and they’re subject to amendment once we get to that process next week,” Foster said.

Funding for the House proposal, as in the governor’s budget, comes principally from federal funds, oil revenue and the scheduled transfer from the Alaska Permanent Fund Dividend Corp. Neither budget calls for spending from the Constitutional Budget Reserve, the state’s principal savings account.

The biggest difference between the two budget proposals is the amount reserved for the dividend. Dunleavy has proposed spending $1.9 billion on the dividend, enough to pay individual dividends of about $3,000.

His spending on all other items in the operating budget is $8.8 billion, according to figures from the legislative finance division.

That actually makes the governor’s budget larger overall than the one proposed by the House, if dividends are included: $10.7 billion compared to $10.45 billion. The governor’s budget uses some one-time funds and revenue transfers that the House budget doesn’t.

For example, the governor proposed that the state stop sharing petroleum property taxes and some fisheries taxes with municipalities. Keeping that revenue would allow more state spending at the expense of local governments, which would be forced to come up with new sources of revenue or make steep cuts of their own.

Communities across the state, particularly on the North Slope and along the coast, complained about that idea, and the House budget keeps the sharing in place.

That won praise from Nils Andreassen, director of the Alaska Municipal League, an organization representing local governments in the Capitol.

“I think the (committee substitute) is responsive to the needs of communities that keep Alaska strong, so I’m encouraged to see this next step,” he said.

Jim Johnsen, president of the University of Alaska, said while riding in a Capitol elevator that it appeared the Legislature was moving in the right direction with the budget.

The university’s budget subcommittee rejected the governor’s cuts and has proposed increasing the system’s budget by $10 million. That increase has been accepted thus far, but it could be reversed as the budget progresses.

The finance committee’s budget did not accept Dunleavy’s proposed cuts to the Medicaid program, but that’s probably only a temporary situation, Foster said.

“I think there’s going to be an effort to go for some more cuts. I think Medicaid’s going to be a big chunk of that,” he said.