“Fund people not the PFD” was the plea on the sign of a protester pleading for more child care funds outside the Alaska State Capitol on Tuesday. But legislative leaders inside the building say both are facing cuts due to the state’s increasingly grim financial outlook.

A Permanent Fund Dividend as low as $1,000, rather than the $1,400 widely discussed in recent weeks, is likely to be adopted this week in a revised version of next year’s proposed budget now being considered by the Senate Finance Committee, said Sen. Lyman Hoffman (D-Bethel), co-chair of the committee.

That comes after the committee last week cut more than $200 million from the $12 billion budget passed by the House — including $13.8 million in child care funds that motivated Tuesday’s protest — and may need to cut hundreds of millions more to avoid a deficit. The main problem is lower-than-expected oil prices and other economic turmoil that is expected to hurt the state’s revenue situation for at least the next two to three years.

“This year, I believe, is a transitional year,” Hoffman said during a press conference Tuesday. “It is tight. It is difficult. There’s something in it individuals don’t like, but next year it’s going to be worse.”

Trimming the PFD to $1,000 would save about $240 million compared to a $1,400 dividend, according to legislative budget documents. The $1,400 PFD — based on last year’s “75-25 formula” that directed the larger percentage of available Permanent Fund earnings to state spending and smaller percentage to dividends — has been included in Senate working documents much of this year’s session. But Hoffman said a new budget draft is scheduled for release later this week.

“Because of the tightness of this year’s budget we are looking at reducing that (dividend amount) further, but no further than $1,000,” he said.

Beyond that there’s essentially only two things legislators can do to balance the books — make cuts to state program spending and/or increase taxes and fees to collect more revenue. Each of those options has critics who say the result will be further harm to the state, including the more than 100 people at Tuesday’s protest seeking to restore the $13.8 million boost to support child care programs.

Participants in the protest — including several legislators — emphasized a lack of child care services is a key reason Alaska currently has a critical workforce shortage.

“Every dollar invested in early childhood programs is the best investment per dollar,” said Joanna Forst, a Juneau resident attending the rally with her son Bodhi, 4, and daughter Grace Daisy, 2. “Because, as it was said earlier by some of our wonderful legislators, early childhood services are preventative and productive strategies for promoting positive impact on health care, criminal justice, education, environmental sustainability, commerce and economy. None of those things can be successful without success at an early childhood age and for families. The future of the state will not be successful without the success, support and security of our families.”

Senate Majority Leader Cathy Giessel (R-Anchorage) said shortly after the event she agrees with the protesters’ arguments, but “the problem is we don’t have any money. We’ve had to make serious cuts.” However, she noted the final few weeks of the session will involve House and Senate leaders negotiating a final compromise budget so “I would encourage them to keep their eye on that.”

“The other thing I would encourage them — and I know this may not be very popular — but we do have some new revenue bills available that could bring in the amount of funding that they need,” Giessel said. Among those is a bill that would require out-of-state businesses to pay taxes for online transactions within the state, although at least some of those funds are already being targeted to fund part of a compromise education bill.

Tuesday’s press conference and protest occurred on day 99 of the scheduled 121-day legislative session. It was also the 100-day mark of President Donald Trump’s second term, whose policies — including global tariffs and mass downsizing of federal programs — are widely cited by state lawmakers in both parties as responsible for the state facing a worse outlook than experts predicted last December.

“The biggest concern, the most unknown number, is what will happen back in Washington, D.C., that may affect our budgets,” Hoffman said.

Republican Gov. Mike Dunleavy — one of the state’s most enthusiastic Trump supporters — acknowledged in an April 17 press conference “the revenue situation has deteriorated a lot” for the state since December. Regardless, the governor affirmed his support Tuesday while in Washington, D.C., as the keynote speaker for a fundraiser.

“The first 100 days of @realDonaldTrump back in office have brought renewed optimism to Alaska,” Dunleavy wrote. “His leadership is paving the way for a brighter future, with strong support for domestic development and American jobs. Our state’s future looks better than ever thanks to his commitment to energy independence and economic growth.”

Experts say the drop in oil prices is largely due to economic worries including a U.S.-China trade war and the increasing likelihood of a recession, Reuters reported Monday. Alaska North Slope oil prices averaged more than $85 a barrel a year ago, and as of last December were forecast to be about $74 for the current fiscal year and $70 for the next fiscal year that starts July 1.

However, Hoffman said new estimates are oil could average $64 a barrel next year, adding to a shortfall already occurring due to this year’s below-expected prices.

Alaska has about $2.8 billion in its Constitutional Budget Reserve that can be used to plug budget shortfalls if necessary — if three-fourths of both the House and Senate approve the allocation. However, Sen. Bert Stedman (R-Sitka), another co-chair of the Senate Finance Committee, said Tuesday the goal is to avoid using any of the fund this year because the situation during the coming year or two may be so dire significant reserves amounts will be needed.

The financial picture portrayed by Stedman and Hoffman was sufficiently grim during the press conference they were asked “are we looking at this year as being the last year of the dividend?”

Hoffman said he doesn’t believe the outlook is bad enough that lawmakers would seriously consider ending the PFD next year.

“I would say that the dividend debate will continue,” he said. “It is not my intent to say that the dividend is on its deathbed. I would say that there’s still a lot of support in this building for the dividend, and I would say that it will be under debate next year and for the coming years.”

• Contact Mark Sabbatini at mark.sabbatini@juneauempire.com or (907) 957-2306.