From left to right: Sens. Jesse Kiehl, D-Juneau; Gary Stevens, R-Kodiak; Mia Costello, R-Anchorage, and Bert Stedman, R-Sitka, speak on the floor of the Alaska Senate on Monday, May 24, 2021, the first day of one of two special sessions called by Gov. Mike Dunleavy. (Peter Segall / Juneau Empire)

From left to right: Sens. Jesse Kiehl, D-Juneau; Gary Stevens, R-Kodiak; Mia Costello, R-Anchorage, and Bert Stedman, R-Sitka, speak on the floor of the Alaska Senate on Monday, May 24, 2021, the first day of one of two special sessions called by Gov. Mike Dunleavy. (Peter Segall / Juneau Empire)

Lawmakers: Budget negotiations to begin Wednesday

Overdraw on earnings reserve divides Capitol

The legislative conference committee tasked with reconciling two versions of the state’s budget will likely begin Wednesday, according to Rep. Neal Foster, D-Nome, chairman of the committee. Still, the likelihood of lawmakers finalizing the budget before Memorial Day was slim, he said.

In a phone interview Monday, Foster said the committee hoped to meet Tuesday but some members were still traveling and might not be in Juneau until Wednesday. Some lawmakers had hoped to finish by the holiday weekend, Foster said, and while that wasn’t very likely he said the committee still intended to work as if Friday was their deadline.

“It’ll be really challenging to do that knowing we have so many pieces on the table,” Foster said.

The Alaska Senate passed a budget last week but members of the House of Representatives failed to concur with its passage, sending the bill to a bicameral committee where a few lawmakers hash out compromises in the budget. Once the conference committee agrees on a final budget, both bodies of the Legislature will have to vote a simple majority to approve it without being able to make any changes.

Staff had only just finished preparing the paperwork to allow the conference committee to do its work, said Sen. Bert Stedman, R-Sitka, co-chair of the Senate Finance Committee. In a meeting with reporters Monday morning, Stedman said conference committee members would address first areas where there’s mutual agreement and then work toward more contentious issues such as the Alaska Permanent Fund dividend later in the negotiations.

[Special session begins, aims to solve Alaska’s fiscal deficit for good]

“I don’t think the operating budget is going to be a complicated discussion,” Stedman said. “We’ll have a budget by July 1. We have to go through the process, it may come together faster than some of us think.”

Deeper divides

The Senate voted for a $2,300 PFD payout, an amount following the formula for calculating the dividend contained in Gov. Mike Dunleavy’s proposed constitutional amendments, which uses half of the state’s yearly percent of market value draw from the Alaska Permanent Fund. But to pay a dividend of that size and keep the state budget mostly flat the state will have to overdraw from the Earnings Reserve Account, something several lawmakers, including Stedman, have said they’re against.

“50-50 doesn’t work,” Stedman said, referring to the proposed formula.

Division of Legislative Finance projections show the 50-50 model still leaving a gap in the state’s budget, requiring additional draws on the earnings reserve unless the state can raise additional revenue. However, Dunleavy has said his proposed amendments are meant to work together, and also proposed combining the principal and the earnings reverse accounts of the permanent fund, which would increase the amount of the state’s current 5% percent of market value draw.

But the permanent fund is the state’s main source of revenue, Stedman said, and taking funds out of the fund today comes at the cost of future state revenues, something he and lawmakers in both bodies are opposed to.

“I’m not concerned about the amount of this year’s dividend as I am about the future of the dividend,” Stedman said. “When you overdraw the permanent fund, you damage future income for every Alaskan for now and perpetuity.”

Foster said he and most of the House Majority Coalition felt strongly about not overdrawing the ERA.

There are still lawmakers who say they support a dividend based on a statutory formula, but it’s not clear if they’ll vote against a budget that doesn’t pay one. House Minority Leader Cathy Tilton, R-Wasilla, said in a phone interview Monday the caucus didn’t have unified opinions on the PFD, but there was a desire to resolve the issue and have a formula the state follows.

[Dunleavy makes changes to Permanent Fund proposal]

“We still have the statutory formula on the books, we should be following the formula until we have a new amendment,” Tilton said, speaking for herself. “I would like to see it stay at least at that 50-50 point, but I have concerns that amount may be even lower.”

Tilton said her caucus was eager to resolve the state’s long-term fiscal issues. The House Minority generally doesn’t favor an income tax, she said, but is willing to consider a sales tax and wants to look at ways to increase resource development as a way of increasing revenue.

Several Republican lawmakers, including the governor, have been staunch defenders of the statutory formula, with some senators losing their committee assignments in the last Legislature for voting against a budget that didn’t pay a full PFD. But Dunleavy and some of those lawmakers said at a May 12 news conference they were willing to step away from that formula if it meant putting the state on stable fiscal footing.

Issues remain

But, Foster noted, the vote for a so-called “reverse sweep,” which requires two-thirds of members in both bodies, has yet to be addressed. The sweep is an accounting mechanism used by the state that automatically empties a number of state accounts at the end of the fiscal year. In previous years the sweep went unnoticed and lawmakers voted to reverse the move when passing a budget. But in 2019, Gov. Dunleavy expanded the number of programs susceptible to the sweep and there were initially not enough votes for a reversal when the Legislature passed its budget.

Sitting on the conference committee are the four co-chairs of finance committees from both bodies, Stedman and Sen. Click Bishop, R-Fairbanks, and Foster and Rep. Kelly Merrick, R-Eagle River, and Sen. Donny Olson, D-Golovin, and Rep. Steve Thompson, R-Fairbanks, who represent their respective minorities.

The outcome of the budget negotiations could have an impact on the discussion for the second special session in August during which lawmakers hope to address the fiscal issue and proposed amendments, Stedman said.

“You have a lot higher degree of success if members are not upset about issues, they’re more willing to sit down and compromise,” Stedman said. “We’re going to button up the budget, and then, we’ll see what the attitude is. It might not be very positive.”

• Contact reporter Peter Segall at psegall@juneauempire.com. Follow him on Twitter at @SegallJnuEmpire.

More in News

A map of Lower Skilak Campground shows the areas that will be closed in July and August 2024. (Graphic provided by U.S. Fish and Wildlife Service)
Areas of Lower Skilak Campground to close for repair starting Monday

The East Loop will be closed — projected to be reopened at noon on Aug. 4

Kenai Courthouse is photographed on Feb. 26, 2019, in Kenai, Alaska. (Clarion file)
Sterling resident sentenced to 30 years in prison for sexual abuse of minors

Additionally, Crane will face 15 years of supervised probation as well as sex offender registration and treatment

Shrubs grow outside of the Kenai Courthouse on Monday, July 3, 2023 in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Former Soldotna police officer acquitted of 2023 assault allegations

He was found not guilty following a five-day trial in late June

A parade of cars and trucks flying flags in support of former President Donald Trump proceed down the Kenai Spur Highway in Kenai, Alaska, on Sunday, July 14, 2024. (Jake Dye/Peninsula Clarion)
Residents caravan across central peninsula in support of Trump

The parade came a day after an attempted assassination of the former president

Drummers perform during a celebration of the 10th anniversary of the Dena’ina Wellness Center in Kenai, Alaska, on Friday, July 12, 2024. (Jake Dye/Peninsula Clarion)
Kenaitze tribe celebrates 10 years of ‘far-fetched dream’ at wellness center

Community members recognized the work done at the Dena’ina Wellness Center over the past decade

The Kenai Safeway is seen on Wednesday, July 20, 2022. (Camille Botello/Peninsula Clarion)
Kenai and Soldotna Safeways may be sold under proposed Kroger-Albertsons merger

The local stores will be sold to CS Wholesale Grocers only if the merger overcomes suit from the FTC

Sockeye salmon caught in a set gillnet are dragged up onto the beach at a test site for selective harvest setnet gear in Kenai, Alaska, on Tuesday, July 25, 2023. (Jake Dye/Peninsula Clarion)
Draft plan published for disbursement of $11.5 million in 2021 and 2022 ESSN disasters

Public comment will be accepted for the draft spend plan until July 24

The Kasilof River is seen from the Kasilof River Recreation Area, July 30, 2019, in Kasilof, Alaska. (Photo by Erin Thompson/Peninsula Clarion)
King salmon fishing closed on Kasilof starting Monday

The emergency order is being issued to protect returning king salmon, citing weak returns

Soldotna City Hall is seen on Wednesday, June 23, 2021, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Soldotna’s city council appropriates funds for FY 2025 capital projects

Improvements are described for streets, police facility, Soldotna Creek Park and Soldotna Community Memorial Park

Most Read