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Legislature under pressure to pass budget before state layoff notices sent out on June 1

 Alaska State Capitol in Juneau, Alaska (KTUU)
Alaska State Capitol in Juneau, Alaska (KTUU) (KTUU)
Updated: May. 24, 2021 at 4:15 PM AKDT
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JUNEAU, Alaska (KTUU) - The Alaska Legislature faces a tough timeline to pass an operating budget before June 1 to avoid thousands of layoff notices from being sent out to state government employees.

Under collective bargaining agreements, notices need to be sent out to all classified state employees 30 days before the start of the next fiscal year if a budget has not passed, warning them of an impending state government shutdown and that they will lose their jobs from July 1.

Brent Wittmer, a spokesperson for the Department of Administration, said by email that each collective bargaining agreement is unique and that the administration strives to provide 30 days of notice to state employees, but that the administration must send them out 10 days before a potential shutdown.

In 2017, the Legislature failed to pass an operating budget before June 1, leading to 18,000 classified state employees receiving layoff notices. Legislators did pass a budget that year, nine days before the state government shutdown was set to begin.

In 2019, Gov. Mike Dunleavy sent out layoff warnings again, but the Legislature again met the July 1 deadline. The state government has not shutdown in Alaska’s history, but the state released a long list of potential impacts in 2017 if a shutdown were to occur.

Nome Democratic Rep. Neal Foster, who oversees the operating budget in the House of Representatives, suggested on Monday that the operating budget could be peeled out from a bill passed by the Senate that consolidated two budgets and federal COVID-19 spending into one piece of legislation.

“There’s a lot of differences,” Foster said between the operating budgets passed by the House of Representatives and the Senate. “But in my talks with the Senate, there’s not a lot of strong sentiment on a lot of those issues.”

If Foster’s plan to separate the operating budget is approved by the Legislature’s attorneys, it could then pass with hopes to avert a shutdown and avoid the layoff notices from being sent out.

Foster added that the Legislature would likely not adjourn the special session immediately after that. It would still need to pass parts of the capital budget, an annual procedural vote required to keep dozens of state accounts full, and make some spending decisions about $1 billion allocated to Alaska through the American Rescue Plan Act.

Senators from across the aisle had hoped to pass a budget and adjourn the special session before the Memorial Day weekend to deal with the state’s fiscal challenges during a second special session in August, but the biggest challenge to adjournment is the dividend.

On the last day of the regular legislative session, the Senate passed a $2,300 dividend, following a 50-50 Permanent Fund plan proposed by the governor. That dividend figure needs to be approved through negotiations with members of the House before it can be paid to eligible Alaskans.

Sitka Republican Sen. Bert Stedman, who oversees the operating budget in the Senate, said it won’t be easy to come to an agreement between legislators concerned with the regressive impacts of cutting the dividend and those worried about overdrawing the Permanent Fund. He was skeptical the Legislature could meet the June 1 deadline to pass a budget.

Paying a $2,300 dividend would see legislators overdraw the fund by $1.5 billion beyond sustainable levels set out by the managers of the Alaska Permanent Fund Corp. The nonpartisan Legislative Finance Division has estimated that for every $1 billion taken out of the Permanent Fund, the state would lose $50 million each year in investment earnings in perpetuity.

Sen. Mike Shower, R-Wasilla, introduced the 50-50 PFD amendment in the Senate and spoke about the impacts of cutting the dividend for Alaskans.

“Right now, we’re putting the burden on the poorest Alaskans and the middle class, that’s the burden of reducing the dividend,” he said, before explaining that new, modest statewide revenue measures would be needed to pay for a larger dividend.

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