Senate passes largest* budget in state history

'If not now, then when?'

Good morning, Alaska!

In this edition: The Senate passed the largest* budget in state history on Tuesday after jacking it up one more time over the objections that the state shouldn’t be passing a budget that relies on oil staying at $100/barrel and still draws on savings. Big-spending conservatives meet criticism over their spending spree by noting that they don’t have to follow the rules because no one has been following the rules on the PFD. The House passes a gutted version of the hairstyle protections legislation. The Senate starts debate on the anti-trans sports bill with Democrats pledging a drag-out fight.

Legislative day: 113

Spice level: 🤑

The largest* budget in state history

Photo by Alexander Schimmeck on Unsplash

There’s a lot of ways to judge the size of the state budget. Do we include the dividend, do we talk only about how much undesignated general fund dollars it spends, or do we roll in all the federal dollars? Well, by just about every one of those metrics, the budget passed out of the Senate on Tuesday is at the top or near the top of every one of those categories. When you roll together the windfall of federal dollars through the covid relief bills and the federal infrastructure bill, it sits at the top of the list with a whopping $19 billion spend. When you look at the amount of undesignated general fund dollars it spends—which is how I’ve typically looked at budgets as it gives us a better look at what the state is bringing in and spending on its own—the budget sits at fifth largest when adjusting for inflation.

With a big dividend and plenty of capital project spending to go around—including $280 million added on Tuesday to pay for the Port of Nome, the Port of Alaska (in Anchorage) and Mat-Su road projects—gone are any attempts to put money away into savings for future years or any future funding for K-12 education. The legislation still maintains a “spending limit” of sorts with provisions that direct any oil revenue north of $100/barrel to be deposited into the constitutionally protected corpus of the Alaska Permanent Fund, which at least means future draws might be a bit bigger. What that means, though, is that the Senate’s budget has a roughly $970 million deficit in it—despite the high oil prices and federal windfall—that needs to be filled from savings.

The Senate’s lead budgeters warned that such a budget puts the state in an incredibly precarious position where any downward pressure on oil prices could spell disaster. Sen. Stedman noted that if oil drops to about $94/barrel, it will deplete the state’s statutory budget reserve and if drops down in to the $70 range, it will also erase the state’s constitutional budget reserve and leave no other recourse than overdrawing the Alaska Permanent Fund.

“I can’t call myself a good steward of Alaskans’ money if we’re drawing on savings at 100 bucks a barrel,” said Juneau Democratic Sen. Jesse Kiehl.