Alaska Legislators still tackle state budgets

Alaska lawmakers are still working to finalize Fiscal Year 2020 operating and capital budgets.
On July 17, Governor Mike Dunleavy issued a supplemental proclamation calling all 60 members of the Legislature to Juneau to reunite the group in an amended special session. A lingering problem is that the amount of the Permanent Fund Dividend check has not yet been determined; the governor and members of the House minority want to use the traditional formula, which would come out to a roughly $3,000 per eligible Alaskan. Other legislators, however, are in favor of a significantly smaller check in order to minimize cuts to state programs. The failure to agree on the size of the PFD has divided the Legislature and complicated the process of passing both the operating and capital budgets.
Last week the governor introduced two bills: House Bill 2002 and Senate Bill 2002. HB 2002 is another version of the operating budget; a rival to House Bill 2001, which was introduced to restore some of the funds the governor vetoed from the operating budget.
Lawmakers worked over the weekend to try to resolve the capital budget bill, SB 2002. Along with the bill itself, to fund the capital budget the Legislature needs to pass a reverse sweep vote. The CBR vote is necessary for money to flow from Constitutional Budget Reserve back into savings accounts. The reverse sweep vote typically takes place at the end of the Fiscal Year, but this year the House minority refused to vote unless the majority would agree to fund a $3,000 PFD.
To pass the reverse sweep requires a three-quarters vote from both the House and the Senate, or 30 and 15 members respectively. On Saturday the Senate voted 19-0 to pass SB 2002 and the reverse sweep. The next day, the House passed the capital budget bill. However, they failed to achieve the 30-vote supermajority needed for the reverse sweep, so funding for the capital budget did not pass. The House took another stab at SB 2002 on Monday. Again, the bill passed but the CBR vote fell short by just one vote. This means that, as it stands as of press time on Monday, money will not return to the PCE or the Higher Education Funds. According to House rules, lawmakers have three chances to vote, so House members one more opportunity to pass a revised capital budget and the reverse sweep before the July 31 deadline. Voting against the bill on Monday were: David Eastman (R-Wasilla), Sharon Jackson (R-Eagle River), DeLena Johnson (R-Palmer), Colleen Sullivan Leonard (R-Wasilla), Cathy Tilton (R-Wasilla), Sarah Vance (R-Homer) and Tammie Wilson (R-North Pole). Four members were absent and Lance Pruitt (R-Anchorage) was the only legislator to change his vote to ‘yes’ on Monday.
In addition to the challenge of funding the capital budget, the Legislature is still debating about whether to reverse some or all of Dunleavy’s $444 million in line-item vetoes from the operating budget. Lawmakers failed to override the cuts by the July 12 deadline, but, in an effort to restore state funding to programs, the House Finance Committee on July 15 presented a new budget bill, House Bill 2001. In its original form, HB 2001 would reverse all 182 of Governor Mike Dunleavy’s line item vetoes and would return swept funds into their savings accounts while paying around a $929 Permanent Dividend check per eligible Alaskan.
Legislative Information Offices across the state held public testimonies from 2 p.m. to 7 p.m. for several days last week to give residents the opportunity to voice their opinions about the budget. There were emotional testimonies from residents on both sides of the debate. A number of people were upset that the dividend, which many believe to be their right as Alaskans, was limited in HB 2001. The majority of those for the governor’s budget supported it because they believe there need to be cuts to spending. They were also in favor of a smaller government, saying that it was unfair they should have to pay for services, such as Medicaid, that only some benefit from. “I think it’s disgusting,” one Wasilla resident said of the Finance Committee’s proposal, claiming that the PFD money would be better spent by individuals than by the government.
However, Alaskans against the vetoes were concerned with the idea of funding the PFD at the expense of essential state services. One testifier said the willingness to put a one-time $3,000 PFD before education and programs for vulnerable Alaskans shows a “disturbing sense of entitlement.”
Gunnar Knapp, a retired professor with the University of Alaska Anchorage’s Institute of Social and Economic Research, explained in his testimony that it does not make good economic sense to fund a full PFD. When the program was first created, Alaska was rich in oil money and had funds to spare. However, this is no longer the case, a reality which should be reflected in the size of the checks. “It does not matter whether we are talking about a household or a state,” Knapp said. “The amount we spend should depend upon the amount we bring in. To try to eliminate a budget deficit without instituting taxes while continuing to pay full PFDs as if the deficit did not exist is ludicrous.”
With this feedback, the Committee offered a new version of the bill on Monday, which would reverse all but $92 million of the vetoes. Significantly, it would restore $110 million of Dunleavy’s $130 million cut to the University of Alaska budget. HB 2001 would pay a $1,605 PFD using funds from the Statutory Budget Reserve and leftover money from the general fund. However, without a reverse sweep, funds from the Statutory Budget Reserve would remain in the CBR. Should the House be unable to pass the reverse sweep vote, the PFD would be $1,336. Another change is that the committee substitute for HB 2001 removes all capital budget appropriations as well as the Constitutional Budget Reserve portion that includes, among other things, the reverse sweep.

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