Alaska Legislature passes budget after one-day special session

JUNEAU — The Alaska Legislature finally agreed on a budget deal Thursday evening, ending a special legislative session after one day.

Lawmakers in the House and Senate passed the spending plan a day after the regular 121-day legislative session ended with no agreement between the two chambers. After lawmakers failed to agree on a budget, Gov. Mike Dunleavy immediately called them into a special session.

The main point of contention between the chambers was — again — the size of the Permanent Fund dividend. Since lawmakers in 2017 stopped following the formula written in statute, the size of the annual payment to Alaskans has held up legislative debate and forced numerous special sessions.

Ultimately, House members agreed Thursday to the dividend figure put forward by the Senate, $1,300 per eligible Alaskan. That’s half the amount put forward by the Republican-dominated House majority last month. House Republicans who had previously championed the larger dividend appeared to be persuaded by a slew of district-specific infrastructure projects.

The House majority’s proposed $2,700 dividend would have required a draw of roughly $800 million from savings. But such a draw, which would have required a three-quarters vote in the House and Senate, did not have sufficient support in either chamber.

House members voted just before 7 p.m. Thursday to agree with the Senate’s budget plan in a 26-14 vote. Ten House majority members joined all 16 minority members in voting in favor of the spending plan. It was a vote that put an end to a special session that could have otherwise lasted weeks.

At least part of the motivation for ending the special session quickly was legislators’ eagerness to leave Juneau. Many lawmakers faced expiring apartment leases and solidified plans to return to their home districts. Warm weather in Juneau for the entire last week of the regular session was a reminder of how stiflingly hot — and uninviting — the Capitol can become in summer.

Lawmakers’ exhaustion was clear during the final House floor session, when they deviated from their tradition of making long speeches to explain their motives and took a vote on the budget with essentially no discussion.

More members of the mostly Democratic minority voted to approve the final budget bill than members of the Republican-led majority, which longtime Capitol watchers said was unusual and potentially unheard of.

“I can’t recall a time when budget amendments … were slanted in favor of the majority to try to get votes,” said Sen. Bert Stedman, R-Sitka. “It’s bizarre, frankly.”

House Minority Leader Rep. Calvin Schrage, I-Anchorage, said “it has been clear for some time that passing a budget would require the support of the minority.”

The special session, which was called for up to 30 days, began Thursday with marathon closed-door meetings between House and Senate leadership members.

The resulting deal — revealed Thursday evening — included an addition of $34 million in capital projects requested by House majority members. Stedman, who co-chairs the Senate Finance Committee, said the Senate had “worked in conjunction” with the House to modify the capital budget, and that all 24 projects added to the budget were selected by House members.

“It might not have been the process that all of us wanted to get to, but it was a process,” said House Speaker Cathy Tilton, R-Wasilla, defending the decision by 10 of her caucus members to vote for a budget bill engineered by the Senate majority.

The projects include nearly $5 million for a Talkeetna water and sewer project, $5 million for the reconstruction of the Palmer Library, $5 million for the Wasilla Airport runway extension and $5 million for a Dillingham harbor project, among other items. Even with the additional projects, the budget is not expected to require a draw from savings.

The $6.2 billion spending plan would leave the state with an $84 million surplus if the price of oil meets projections for the fiscal year that starts July 1.

House majority members said Wednesday night they had decided not to agree to the Senate’s spending plan because the Senate had chosen not to pass the budget until just a few hours before the regular legislative session was set to expire, limiting the House’s negotiating power. But by Thursday, many appeared persuaded by the $34 million in capital projects added to the budget, despite the lack of movement on what they had said earlier were their top priorities, including a larger dividend.

“I came to the conclusion that in 30 days, we’d be right here,” said Rep. Craig Johnson, R-Anchorage, who voted in favor of the budget. “I would have preferred not to have voted for it. But when I weighed the shutdown, the cost, the practicality — I’m a pragmatist. I’ll fight for what I believe in, but at the end of the day, I think this is the best we could get.”

Without agreement on a budget by July 1, the state would have entered its first ever government shutdown, with unknown consequences. The cost of a 30-day special session can be in the hundreds of thousands of dollars.

While some House members pinched their noses, the bipartisan majority in the Senate celebrated the budget as a victory.

“We wound up with a moderate dividend and a lot of money for education, which would be the highest amount of money ever given to education by the state, and with a balanced budget. I mean, what more can you ask out of life?” said Senate President Gary Stevens, R-Kodiak.

“We’re very happy about the arrangement we have. We’ve worked hard on the House. They came a long way. We’ve found a way to compromise with some extra projects at the end of the budget. And I think everyone should be remarkably happy with how they’ve turned out,” Stevens added.

Majority Republicans who voted against the budget cited both the Senate’s control over the process, and the House majority’s lack of a principled stance on any priority other than district-specific infrastructure projects. Rep. Julie Coulombe, R-Anchorage, said she “can’t concur with bullies and bribers.”

Rep. Justin Ruffridge, R-Soldotna, said after voting against the budget that he doesn’t like “being bought.”

“It’s kind of what that felt like, a little bit,” he said.

“The last three days it’s kind of been a question mark. What is it that we stand for? Do we stand for fiscal conservatism? Do we stand for a fiscal plan? Do we stand for good policy? Education? I think the answer to that is kind of none of it,” said Ruffridge.

Efforts by the House majority to pass a spending cap that would constrain future spending on state services — which some majority members had said was a top priority — fell apart in the final days of the session amid disagreements between caucus members.

The Senate had previously amended its budget — in an effort to garner support from House members — to include a provision that would promise an additional payment to dividend-eligible Alaskans of up to $500 if the price of oil averages above projections made in March. Revenue from higher-than-expected oil prices would be split between the payment to Alaskans made in the fall of 2024, and a deposit in savings.

“Would we have liked it to be higher? Well absolutely,” said House Finance Co-Chair Rep. DeLena Johnson, R-Palmer, on the size of the dividend. “But you know, sometimes you only get to meet in the middle.”

The budget also includes a $175 million one-time school funding boost, equating to a $680 increase to the Base Student Allocation, the per-student funding formula. That is the largest single-year increase in public education spending in the history of the state, but it is not permanent, after House majority leadership thwarted a last-minute effort in the final days of the regular session to pass a bill that would permanently increase education funding.

Minority members ended the session celebrating their successes in advancing the large, while temporary, education funding boost, and a budget that avoids a draw from state savings.

“We’re proud to have played a majority role in passing this budget,” Schrage said.

The House majority, meanwhile, ended the session with a goal: “We’ve got to get better,” said Craig Johnson.

Since the beginning of the session, the caucus — which organized on the second day of the legislative session — had been criticized for failing to unify on a shared list of priorities. They were sometimes defined more by areas of disagreement, like education funding and fiscal plan options, than by their shared goals.

“We’ve learned a lot,” said Johnson. “We’ll be much better. We’ll be much more organized. We’ll have a much better relationship with the Senate, I hope.”

While the Alaska Legislature ended the special session on its first day, legislators may meet again before next year. Dunleavy has indicated that he would call an October special session to debate a solution to the state’s long-term structural deficit and to permanently resolve the Permanent Fund dividend debates.