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Alaska House rejects Senate’s budget with $5,500 in cash payments

Alaska House rejects Senate’s budget with $5,500 in cash payments
Published: May. 14, 2022 at 1:53 PM AKDT
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JUNEAU, Alaska (KTUU) - The Alaska House of Representatives has rejected the Senate’s budget, meaning another round of budget negotiations is now set to begin in the final days of the legislative session.

The Senate’s budget has a full Permanent Fund dividend at roughly $4,200 and a one-time energy relief check at $1,300. Combined, the two checks would cost the state almost $3.6 billion. Those cash payments are more than double the size of those in the House’s budget.

A conference committee is set to meet to negotiate the differences between the House and Senate’s budget so a single bill can pass through both chambers and onto Gov. Mike Dunleavy’s desk for his consideration. Reps. Kelly Merrick, R-Eagle River, and Dan Ortiz, I-Ketchikan, will represent the majority and Rep. Bart LeBon, R-Fairbanks, will represent the minority.

Sen. Bert Stedman, R-Sitka, and Sen. Click Bishop, R-Fairbanks, will represent the Senate majority caucus. Sen. Bill Wielechowski, D-Anchorage, will represent the minority. Wasilla Republican Sen. Mike Shower objected to those appointments, arguing that the composition of the committee will not benefit his constituents.

The Senate’s budget has been called irresponsible, unbalanced and defective by some legislators. Others in the Alaska Legislature have said it would go a long way to providing fiscal relief to Alaskans and investing in critical infrastructure projects like the Port of Alaska and Port of Nome.

After days of delays, the concurrence vote failed 18-22 on Saturday afternoon. Reps. Neal Foster, Tiffany Zulkosky and Josiah Patkotak joined Republicans in voting for the Senate’s budget.

Republican Reps. Steve Thompson, Bart LeBon and James Kaufman from the minority joined the largely Democratic majority coalition in voting to reject it. Wasilla Republican Reps. David Eastman and Chris Kurka voted against passing the Senate’s budget because it uses Medicaid funding for abortions.

In recent days, a coalition of Alaska businesses urged the House to reject the Senate’s budget, saying that state savings accounts need to replenished and that the Senate’s budget risks taxes being imposed in the future. Resource development groups made a similar plea to legislators and so did Alaska’s unions.

Legislators have also heard emotional stories from Alaskans who say a full PFD would make a big difference during a period of high inflation and high energy prices. There are particular concerns about the rising cost of fuel and heating oil in rural Alaska.

The Senate Finance Committee got an updated fiscal picture on Friday. The nonpartisan Legislative Finance Division showed that the Senate’s budget has a $1 billion deficit with the crude oil price over $101 a barrel, meaning savings would need to be used to bridge the fiscal gap.

If the price of oil averages $93 or less over the next fiscal year then one state savings account would be drained. If the oil price averages $75 or less over the same period, the Constitutional Budget Reserve would also be emptied, but that requires three-quarters of legislators voting together to spend from it.

The Permanent Fund could be overdrawn with a simple majority vote, but that would spend from the fund now used to pay for state services and the dividend. It would also violate a sustainable rules-based system, which has been set in state statute.

The value of the Permanent Fund has dropped in recent weeks below $80 billion with a downturn in the stock market. If the price of oil drops by $2 a barrel over the next fiscal year, the state will lose between $150 million and $200 million. The surplus projected for the current fiscal year is expected to be lower than forecasts made earlier in the year, said Alexei Painter, head of the Legislative Finance Division.

Several Republicans from the minority said the price of oil is not expected to fall soon, meaning the Senate’s budget numbers could work. Rep. Kevin McCabe, R-Wasilla, called the deficit concerns “hype and fear mongering.” Other legislators, like LeBon, called the Senate’s budget unbalanced and said that it is based on “very optimistic” oil prices.

Dunleavy held closed-door discussions with legislators after the Senate passed its budget on Tuesday. Several legislators say he had pledged to veto the $1,300 energy relief check to bolster state savings account and to encourage fiscal conservatives to support the Senate’s budget, but some lawmakers noted there have been no public assurances about any veto plans.

“We as policy makers need to understand that the serious financial issues facing Alaskan families, mainly rising costs due to inflation, should be at the forefront of the budget process. We can never lose sight of why we are here, it’s the people of Alaska,” the governor said through a prepared statement after the House rejected the Senate’s budget.

The legislative session must end by Wednesday at midnight.

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