The Alaska House Finance Committee advanced a proposed state operating budget for the next fiscal year, which begins July 1. It contains $14 billion and includes a full statutory Permanent Fund dividend, estimated at around $3,800 per eligible Alaskan.
The full PFD was an apparent mistake that Democrat Rep. Andy Josephson of Anchorage made when he proposed the budget. He is not one to promote a full PFD, but it was an oversight he made as chair of House Finance. He was then stuck with it, as , rural Democrats on the Finance Committee were too fearful of their reelection chances to take it out. The Democrat majority, with rural Reps. Neal Foster and Nellie Jimmie showing reluctance to take money from their constituents, just didn’t have the votes to reduce the dividend.
Thus, the budget is nearly $2 billion in the hole, with no apparent easy way to fund it.
The proposal has been sent to the House floor for a vote, where skepticism remains about being passed in its current state. The House is supposed to pass a funded budget, but Josephson’s budget has no funding.
Josephson admitted in a Finance Committee meeting that he had had secret talks with the Senate, so he may have something up his sleeve.
To fund the deficit, there is still the Constitutional Budget Reserve, which has about $2.8 billion in it. But that requires a three-quarters vote of both House and Senate to tap into.
The CBR was established by voters in 1990 as an article of the Alaska Constitution. Its stated purpose is to serve as a savings account to help stabilize the state’s finances by providing a reserve of funds to cover budget deficits during times of low revenue, particularly when oil prices or production decline. The CBR is meant to store excess revenue from certain one-time sources, such as settlements or legal judgments related to mineral revenues (primarily oil), and to protect the state against fiscal volatility due to its heavy reliance on resource-based income.
The state government has used the CBR to balance its budget for 10 years in a row, starting around fiscal year 2015.
Meanwhile, the supplemental budget to pay for items in this fiscal year passed the House on Thursday, also unfunded. On a vote of 21-19, the House Democrats may be thinking there will be enough money in the CBR to also pay for this year’s supplemental needs. But there’s not enough in the CBR for the supplemental and next year’s deficit.
The end-game is upon the Legislature, which has a final date of April 20. Negotiations will continue and those who frequent the Capitol are predicting that a special session will be called, which could extend the power plays until May 21. The new fiscal year begins July 1.