State budget: Education and Medicaid make up 44% of overall state spending



The proposed State budget for Fiscal Year 2021 may look flat, but that’s only part of the story.

The FY21 budget totals $4.532 billion Unrestricted General Funds, $969 million Designated General Funds, $760.3 million other State funds, and $3.9 billion federal funding. Added together, the spending package is $10.2 billion.

The governor’s plan also provides for a full Permanent Fund dividend, fully funds K-12 education, and increases funding for public safety through the Department of Public Safety, the Department of Corrections, the Department of Law, and the Alaska Court System.

However, the flat budget is being gobbled up by the built-in increases in salaries of state employees, said Senate Finance co-chair Bert Stedman today during a presentation by the Office of Management and Budget. Wages and merit increases will soon push the cost of government upward again.

The deficit in the budget as it stands now will essentially drain the Constitutional Budget Reserve, and it won’t be able to be replicated with next year’s budget, said OMB Director Neil Steininger.

“There’s not enough money in the CBR to do that,” Stieninger said. He suggested that some of the statutory pressures on the programs need to be changed through legislation.

“If there’s only $500 million left in the CBR (at the end of the FY21 cycle), next year, we’re going to be a billion short,” Stedman said. “Where does it come from?”

“Just as a general note, I think I want to be working with OMB not on a 10-year plan but on a three-year survival plan,” Stedman told Steininger. “Because the time horizon is getting extremely short.”

Steininger agreed: “We need solutions that last for more than one year. And those aren’t solutions that can be made just in a budget bill.”

Neil Steininger, Director of Office of Management and Budget

“The solution to this problem goes beyond the operating budget,” Steininger said.

Although the number of Executive Branch employees has remained stable at over 15,000 state workers (excluding Judiciary, Legislature, and University), the cost of employing those workers goes up year after year. Stedman was making the point during Finance Committee that even a flat budget is hard to replicate year after year without one of those levers moving.


Senate Finance heard today that K-12 education takes up 30 percent of the State budget, and the base student allocation (how much the state spends per student) has increased by 42 percent in recent years, while enrollment in schools in Alaska has remained essentially flat since 2004.


Medicaid now covers the medical bills for 35 percent of the state’s population — roughly 255,500 people. That’s double the number of Alaskans enrolled in Medicaid back in 2004, and it is one of the biggest cost drivers for the state’s budget. The increase in the State’s Medicaid budget has grown by $414 million between 2004 and 2021, and is now $644.3 million.

National Association of State Budget Officers (NASBO) found that for FY 2018, states’ Medicaid accounted for 20.2 percent of total state general fund spending, second only to spending on elementary and secondary education (35.8%).

Alaska’s Medicaid entitlement spending is at 25 percent of the state’s general fund budget, and more will be added in this budget. Meanwhile, the state’s population has dropped and is at the lowest level since 2012, at 731,000.

Co-chair of Finance Sen. Natasha Von Imhof said that the per-individual cost of Medicaid is down, even while the enrollment population has doubled.

For comparison, California has the most people on Medicaid, but it’s only one in four residents. In Wyoming, only 10 percent of the state’s 567,000 residents are Medicaid recipients.

In the governor’s budget, the constitutional budget reserve would have just $452.4 million left at the end of FY21. Over $16 Billion in budget reserves have been spent from the state’s reserves since 2013 to make up for budget revenue shortfalls.

The largest item in the governor’s proposed budget is the statutorily calculated Permanent Fund dividend. The Legislature has not used the legal calculation for the dividend for several years, however, but has been choosing an amount each year that they believe is politically palatable. The governor has said he’s willing to change the statute, but so long as it’s in law, he believes in following the law.


  1. Summary: Kicked can finally reaches end of road.

    Reduce the PFD, restart the income tax, cut some State expenses, and the problems go away forever. Continue with the greedy mindset of “full PFD”, and a “no taxation as birthright” mentality, and the Great State of Alaska will be finished. This is not a hard problem to solve. It’s time to act responsibly, join the ranks of the other 49 states, and get your financial affairs in order. The CBR fund is empty. Simple as that.

    • And keep spending like it grows on trees? 35% of our population is on Medicaid? You think that is good? That isn’t Medicare, it is welfare healthcare and while we are at it, where are the percentages for all the actually working people that have no health insurance?

    • It’s time to recognize that 54 school districts at roughly $500,000 in administration costs (+/-) = $27,000,000 pet year. The next largest regional map on (hunting and fishing) has about 25 (as I recall). 25 school districts x $500,000 = $12,500,000. Take their overspending down and return to the historical PFD calculation and distribution.

      • Beth – $12,500,000 is $1,987,500,000 short of funding your PFD. That would also save less than 1% of the annual cost for K-12 education.

    • Dog,
      I think the onset of decline to the left in Alaskan fiduciary, financial, judicial and political “matters” was when you and others (more recently arrived) of similar mindset decided to try and transform Alaska into another liberal stronghold. Denigrating the “birthright mentality” you accuse, based on your opinion alone, is not becoming of your insinuated mentality. Adding more taxes, overspending, more financial liability and leftist agenda, to the state/citizens’ shoulders is not the answer. The answer is to reduce state spending to the level of income (balance the budget). Very simple, very basic. Most things good for you aren’t always pleasant, but necessary. Thank God Alaska isn’t like your “other 49 states” (yet). Financial affairs in order? Most of your “other 49” are either bankrupt or on the verge, due to leftist mismanagement and those gov’t “entitlements” to American and non-American recipients you write of (not PFD’s). That is reality. Alaska needs to stay as far away from those policies and “leadership” as possible.

  2. Once again Alaska joins the group of 11 states with over $10K in medicaid spending PER ENROLLEE. There are many ways to cut these extravagant expenses, but our bloated Alaska bureaucracy is not imaginative enough to implement the cost savings other states have implemented. We spend about twice as much per new person covered as Colorado, New York, Arizona, Washington and many others, and most states spend over 25% less than Alaska on ALL persons covered. Only a few states spend as much as we do.

    I can get better service and pay 25% of what Alaska hospitals charge by just buying a $300 plane ticket. Our certificate of need system is broken and we’re being gouged in the Interior, probably in Anchorage too, and we’re letting it happen.

    Refer to:

  3. Governor Dunleavy has courageously focused attention on Medicaid and educational funding. Alaska’s fiscal future cannot be clarified or improved without discussing these programs.

  4. Remember when they said the feds would pay most of medicaid costs? That was how they sold it. Now able people that just don’t feel like working get “FREE” money. I told you six years ago this would happen.

  5. What’s that big red bar that dwarfs education spending??

    How is this even close to consistent with the original constitutional amendment that created the Permanent Fund? I’m no attorney but the campaign to enshrine the statutory payouts at the expense of respecting the intent of the constitutional amendment puzzles me.

    How many of the 75,588 voters that approved the 1976 Permanent Fund Constitutional Amendment would approve of bankrupting the state in order to maintain unsustainable dividends/ entitlements? So much for the “rainy day” concept many voters were supporting.

    • Well said! The “full PFD” philosophy is akin to the practice of pillaging the natural resources of the State, and then bailing out when there’s no more left to dig/drill/catch/cut.

  6. This is a great 1980 circa video describing various policy proposals for using excess oil funds, including sage advice from Gov. Hammond that was sadly ignored.
    After watching something like this, how can conservatives claim that the current massive entitlements under the dividend program are consistent with what the average voter intended in 1976 when the Permanent Fund was created?

  7. How much per student is our educational spending? Last I looked it was around 20k per student, and either the highest in the nation or second to the highest. As for healthcare, would like to see the numbers for those that fall through the cracks and are not insured. Many are self employed. Obamacare really did nothing but put more people on the dole, raise insurance premiums, putting insurance out of reach to much of the middle class, and raising healthcare costs. And the only answer the left has is spend, spend, spend, take the pfd, institute more taxes. All putting more burden on the people supporting those not contributing.

    • Madam, kindly list for us all the taxes you pay to the State for the proper running of the Government.

      All across the world, people somehow pay a portion of what they earn in order to support their Government for the common good. Alaska is the only place I’m aware of where they pay little to nothing, and then expect $3-6,000 in cash per year in the form of a PFD handout.

      It’s time for Alaskans to face reality. The oil party is over, and it’s time to start paying your way.

      • How about the $4,800 in taxes taken from the PFD of all of my family members last year? That’s more than I pay in Federal taxes and I am very middle class.

        • Sir, claiming that a reduction in the amount of an unearned handout is more than a little rich. Alaskans have one of the lowest overall tax rates in the entire country because there’s no State income tax, many places have no sales taxes, and property taxes are mid-range. A functioning government is a necessity, and starving it of funding is a disservice to all of the citizens of the State (ask people in Kansas). The entire PFD program has done nothing more than create a massive sense of entitlement in the State, including amongst Conservatives who otherwise despise welfare payments and social services. Furthermore, calling it a dividend is phony – it’s nothing of the sort. Dividends come from investment, and most Alaskans have invested nothing in the oil industry cash cow that generates it, aside from living there. What a sad state of affairs.

          • Whidbey,
            1) Your view of “tax” is fairly narrow. Any usage of public revenue by the government for services is a tax. The natural resources that garner income to this state belong to me and so do the proceeds. This is the reason for the PFD. As such, any garnishing of the PFD is indeed a flat tax levied on the populus. Liberals say that conservatives are hypocritical because we endorse the PFD but not welfare programs. I say that the liberals are hypocritical because they deny flat taxes in any other arena but praise our legislators for levying a flat $1,200 tax on all citizens.. including my 1-year old.

            2) “Dividends come from investments” . . . See above. The oil revenue belongs to the PEOPLE, who have enacted legislation to INVEST it via the Permanent Fund, and receive DIVIDENDS mandated by law.

  8. Just because other states have an income tax doesn’t mean Alaska need have an income tax. There are states that do not have an income tax. Income taxes make it far too easy for the government to get your money and use it however the government sees fit. If we’re going to have a tax at least the sales tax gives you an option. Hold down your spending & you pay less tax. Its alot harder to control how much of your money is seized if it comes out of your income. Everybody needs an income. Finally, the PFD is not an entitlement. Unless you call interest savings or stock dividends entitlements. And those would likely (not at first maybe) eventually be taxed with an income tax too even if you only make &45,000 (for 2) a year like me. Then retirement income & social security. At least with the PFD everyone gets the income vs without it, only those who the deciders believe should get it. Just look at the state legislature right now. Conservatives being stripped of power for trying to speak out through their vote. Do you really want some of these people controlling how much of your income is taxed so they can advance their agendas no matter what you believe?

  9. Vote for a wholesale change in Juneau. Get rid of what got us to this point. Start over with real Alaskans and people who understand a budget. Clean house. Look at what they have done for us. What a mess the Legislature has made.

    • Well, Mark, sounds like it’s your turn then to step up and run for office instead of just complaining about the poor job done by other legislators thus far. We’ve heard your complaints. Now, what are your solutions? Let’s hear them. Please be specific.

      • Oh my gosh, Whidbey, I certainly don’t have the time to read all of your nonsense but I don’t believe that I’ve seen you exhibit support for any cuts other than to the PFD payouts and nor do I recall you taking umbrage at the irrefutably wasteful spending that others have called attention to (Medicaid, K12 education, the bloated university system, AMHS, grossly inflated wages for many state employees, all manner of “non-profits”, etc).

        Please forgive me for not hanging onto your every word but your lefty diatribes leave the clear impression that you and/or your loved ones might be riding the gravy train in some fashion. Is that the case? If so, please be specific. Thanks, hon.

        • Well, Auntie, if you read my post at the top, you would see the following: “Reduce the PFD, restart the income tax, cut State expenses, and the problems go away forever. “. Time to share the pain. The oil ride is over. And by the way, I’m a guy who worked hard in the Alaska oilfields for decades, raised a family, saved, and invested. Now nicely retired as a result. You have a nice day, hon.

  10. Well, Tyler, Alaska can’t make ends meet anymore. Your philosophies are interesting, but here is reality: If you stay living in Alaska, your PFD will eventually be reduced, and you will start paying taxes of some sort. And if you move elsewhere, you will receive no PFD, and pay even more in taxes. Simple as that. Suck it up.

    • I don’t mean to be rude, but saying “suck it up” really seems like a cover-up for “I don’t have a substantive rebuttal”. If you can say suck it up about PFD and taxes, then I can say suck it up about cutting medicaid and education. Except I don’t: I have well-formulated ideals for the problems that face us.

      Also, if I move to Florida or Texas, sure I get no PFD. But I don’t get state taxes and what I do get is a better state government. Alaska can do better than just resorting to taxing the population, which is the same played out leftist idea that has failed California, Washington, Illinois…

      • Moving to either of those states will cost you 6-8% in state sales taxes which are used to fund state government. Do your well-formulated plans include significant cuts to Alaska State government and concomitant reductions in staff?

  11. So the argument seems to be that the natural resources of the State belong to the bureaucracy to sell to whomever. It certainly was noble of the political class to let the Natives retain some of their ownership and to throw the rest of us some scraps. PFD is welfare, it must end, just be glad you live in this great State and have wonderful people to take care of you. We can’t carry you anymore so you will have to pay us to take care of you. The cupboard is bare, there is no more room for cuts. And thanks for the perks.

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