The Senate voted to add $373 million to the current fiscal year’s budget.
The Alaska Senate voted unanimously on Wednesday to advance a spending bill that adds $373 million to the current year’s budget. Senate members also unanimously agreed to draw from the Constitutional Budget Reserve, a $3 billion savings account, to cover the new spending.
Drawing from the account requires support from three-quarters of lawmakers — a hurdle that the Senate handily cleared Wednesday, two weeks after the House failed to reach that threshold, amid opposition from House Republican minority members. Unexpectedly high oil prices, driven by the war in Iran, are set to bring in tens of millions of dollars in additional revenue to the state, but it likelyto cover the full cost of the additional spending needed in the current fiscal year, according to the Legislature’s nonpartisan budget analyst. Still, the unforeseen revenue paved the way for a smaller than previously expected draw from savings, smoothing the way for Republican minority members’ support for the bill in the Senate. “Given the situation in the Middle East and the war, we have seen a spike in oil revenues, and I think that as a result of that, we are able to accomplish what I feel needs to be addressed for the state of Alaska, and also the concerns of many members of the minority,” said Sen. Lyman Hoffman, a Bethel Democrat who co-chairs the Senate Finance Committee.the supplemental budget bill late last month, five days before the attack on Iran began. The war has caused oil prices to spike, and with them Alaska’s revenue forecast. At the time the House passed the bill, it was projected to require roughly $500 million from the state savings account.An amendment adopted on the Senate floor eliminated roughly $50 million in funding that had been previously projected, based on lower oil prices, to be needed from savings to cover this year’s budget. It also eliminated $30 million in “head room” that House members had written into the bill in case oil prices dipped below the forecast. The Senate majority also agreed, at the request of minority members, to remove from the budget roughly $78 million that had previously been included in the bill to cover unforeseen agency operations, primarily for Medicaid and the Lawmakers later said that if oil prices remain high enough through the summer, those agency operations can be covered without again voting to draw from savings.If the price of oil averages $77 per barrel until June, the state will be able to cover those costs using the unforeseen oil revenue, said Sen. Bert Stedman, a Sitka Republican who co-chairs the Finance Committee. If oil prices remain closer to the current projected average of $68 per barrel, then another draw from the Constitutional Budget Reserve account will be needed. “That doesn’t look likely today with what’s going on internationally,” said Stedman. “At the end of the day, in May, we will be leaving town with our bills paid.” The North Slope crude price stood at $94 per barrel as of Friday, a price it had not reached in more than two years. “But it’s not every day that we’re going to be able to rely upon a war, with the higher prices of oil, to bail the state of Alaska out,” said Hoffman. “We need to buckle down and find additional new revenue.” The supplemental funding that remains in the bill includes $70 million in state transportation funding needed to leverage hundreds of millions of federal transportation dollars.Gov. Mike Dunleavy asked for that funding after he vetoed in June tens of millions of dollars that lawmakers had sought to reappropriate from older transportation projects to cover the state match requirements to receive federal funding. In vetoing the reappropriations, Dunleavy said that the funding was already obligated for other uses.for urgent action to reinstate the transportation funding, fearing that a loss of federal expenditures could have far-reaching effects on the state’s economy. Industry pressure led lawmakers to take quick action on the supplemental budget bill, moving it through the House and Senate on a faster pace than typical for appropriations. “We potentially risk losing a construction season,” said Sen. Bill Wielechowski, an Anchorage Democrat. “That means your projects don’t get built, your roads don’t get fixed.” The bill also includes $98 million in fire suppression funds and $40 million for disaster relief, to cover already-incurred expenses. The bill includes contingency language that would add $35 million in disaster relief funding in case the Dunleavy administration is unsuccessful in its efforts toThe fire and disaster funding is needed in part to make up for other Dunleavy vetoes. In June, Dunleavy vetoed $10 million that lawmakers had sought to appropriate to the disaster relief fund, and $26 million that lawmakers had sought to appropriate for fire suppression. The bill also includes just under $130 million for the Alaska Higher Education Investment Fund, after lawmakers allowed funding from the account — which pays for university scholarships — to be used to cover a deficit in the previous year’s budget. Sen. Robert Yundt, a Wasilla Republican, said that it was important to recapitalize the fund and avoid drawing from it in the future — an unorthodox move that majority lawmakers turned to last year after Republican minority members refused to agree to draw from the Constitutional Budget Reserve. Every month, the fund is losing out on around $400,000 in market gains that would have been made if the $130 million had remained in the account, Yundt said. Senate Minority Leader Mike Cronk, a Tok Republican, said that holding off on approving supplemental spending for Medicaid to the tune of $35 million, and for the Department of Corrections to the tune of $24 million “allows us a little opportunity to dig a little deeper into why they’re coming back to us with the supplemental issues that we have.” “I think that’s part of our job, is to make sure that we can understand why the costs have increased so much,” said Cronk. The agreement between the majority and minority on removing agency operations from the supplemental budget bill was struck shortly before Wednesday’s floor session, Yundt said.All funding included in the bill, aside for the contingency funding for disaster relief, had originally been requested by the Dunleavy administration. Hoffman called it “a direct request from this administration to accomplish providing the necessary services that the people of Alaska anticipate.” The bill now returns to the House, which must vote to accept or reject changes made by the Senate. The Republican House minority declined on Wednesday to vote on the bill immediately after the Senate passed it. Minority Leader DeLena Johnson, a Palmer Republican, said she wanted to vote on the bill after the Dunleavy administration publishes an updated revenue forecast, which is expected by the end of the week.“I would rather rely on the experts that have spent some time analyzing the futures and analyzing oil price, than just winging it on the size of that budget,” Johnson said.Four years ago, lawmakers responded to higher-than-expected oil prices — driven by Russia’s attack on Ukraine — by paying out a large Permanent Fund dividend at a cost of $2 billion to the state. House majority leaders issued statements earlier this week urging caution in the face of rising oil prices. “A few weeks of high oil prices does not change our responsibility to pass a balanced budget that reflects the realities of our revenue outlook,” said House Speaker Bryce Edgmon. “As a rural legislator, I’m also extremely concerned about the skyrocketing cost of energy, including diesel, which affects the cost of living and basic goods everywhere in the Bush.”Iris Samuels is a reporter for the Anchorage Daily News focusing on state politics. She previously covered Montana for The AP and Report for America and wrote for the Kodiak Daily Mirror. Contact her at isamuels@adn.com.Man charged with murder, other offenses in death of Anchorage assisted living facility resident Alaska House minority unsuccessfully seeks censure of Democrat who protested ICE during Begich speech
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