PFD and school funding keys to balanced state budget
Legislators are working to balance the state operating budget for the fiscal year that starts July 1, with school funding and Permanent Fund dividends at the forefront of the conversation. Both are likely to be reduced from last week’s House Finance Committee budget proposal, but by how much is still in question.
That budget included a PFD of roughly $3,900 — the highest ever — which House leaders said this week is obviously unaffordable.
“It is not a sustainable number and it's not something that we should be even stoking the fantasy over – that the number would even be possible – with our constituents,” House Majority Leader Rep. Chuck Kopp (R-Anchorage) said in a press conference Tuesday.
Also included in the House committee version of the budget is a permanent $1,000 increase to the per-student funding formula, which would cost the state $275 million.
Rep. Andy Josephson (D-Anchorage) said increasing the per-student funding formula is necessary and is not the only problem when it comes to the $1.9 billion deficit budget deficit. The massive $3,900 PFD would cost the state treasury almost $2.5 billion.
“Is it expensive?” Josephson said of a sizable boost in state aid for schools. “Sure it is. Must we do it? You bet,” he said.
Minority caucus member Rep. DeLena Johnson (R-Palmer) said the school funding increase is “just not possible,” during a press conference Tuesday.
The House Finance Committee will keep working on the budget bill. The full House will need to vote on the bill before the budget can move to the Senate for consideration.
One thing stalling the move out of House Finance is the inability to reduce the PFD from the $3,900 that the governor proposed in his budget back in December. The committee last week considered setting the PFD at $1,000 but it failed to pass.
Rep. Neal Foster (D-Nome) and Nellie Jimmie (D-Toksook Bay) are both in favor of a full $3,900 dividend, citing the need for their constituents in rural areas. They didn't vote to reduce it last week in committee to $1,000. Jimmie told the Nugget she’s not opposed to reducing the PFD, but wants the highest number possible. Minority members are being called on for a change to pass the committee.
Speaker of the House Bryce Edgmon (I-Dillingham) said it’s a matter of working with the minority to “bridge the differences” on the PFD. He said he understands the perspectives of his fellow Bush caucus members, “but we can't get it done unless we sit down and work together, we simply can't.”
Other options for balancing the budget are cuts in other spending areas, as suggested by the House minority.
Falling oil prices, however, are deepening the state budget gap, which is short hundreds of millions of dollars in revenue.
“We are in extraordinary circumstances with the price of oil and the stock market falling daily,” Rep. Louise Stutes (R-Kodiak) said during the press meeting.
Increasing revenue is another option. A bill introduced in the Senate proposes increasing taxes on oil companies. Kopp opposes those measures. He said Tuesday he doesn’t want to kill an “energy renaissance,” referencing ConocoPhillips’ North Slope Willow project and other potential oil projects proposed over the next few years.
For now, the goal is to have a balanced budget bill on the House floor by next week, though it’s unclear how that will happen.
“Ladies and gentlemen, were all in a pickle. It's not just the House majority, it's the House minority, it's the governor, it's the Senate majority, it's the Senate minority. We all own the situation in front of us,” Edgmon said.
This article was updated to reflect that Rep. Nellie Jimmie is willing to approve a PFD smaller than full dividend.
This reporting from the State Capitol by Nugget reporter Anna Lionas is made possible by the Alaska Center for Excellence in Journalism’s Legislative Reporter Exchange. Alaska news outlets, please contact diana@nomenugget.com to republish this story.