Small victories, setbacks and rampant uncertainty define this year's session

Good morning, Alaska. It’s Monday, Day 119 of the legislative session.

In this edition: This year’s legislative session is making its final descent, landing what is largely a mixed bag as the high hopes of the early days of the session have been reined in by a worsening budget situation, broad international uncertainty and a governor who has demonstrated little interest in compromise. Over the weekend, legislators secured extra funding for child care and child advocacy centers as they finalized an otherwise austere budget. And meanwhile, the biggest question about what Gov. Mike Dunleavy will do with public school funding and the new revenue to pay for it remains unanswered as a whole panoply of nightmareish budget scenarios loom over the state.

Current mood: 😬

Small victories, setbacks and rampant uncertainty define this year's session

The conference committee closed out the operating budget on Sunday, settling the differences between the optimistic budget passed by the House in mid-April and the Senate’s no-fun budget passed earlier this month. In a fitting way to cap off the session, the Senate’s bare-essentials budget won out with a few exceptions for key programs supported by the House. These include $13.7 million for child care programs, $5.5 million for child advocacy centers that help children after suspected abuse, $13.75 million for behavioral health programs targeted at the state’s homeless population, $5.7 million for early learning, and 15 additional positions for the state’s beleaguered public assistance programs.

They’ll get the budget to the floor today, setting up a vote for Tuesday with the final day of session on Wednesday.

A lot more is left out of the budget, including the $2,900 difference between the $1,000 dividend in the budget and the $3,900 dividend that Gov. Mike Dunleavy proposed. But instead of the governor’s $2.1 billion deficit, the budget achieves a skimpy surplus of about $55 million, which could be erased by various factors outside lawmakers’ control.

Complete coverage from the Beacon: Alaska Legislature finalizes $1,000 PFD; vote expected as soon as Tuesday

Oil prices are already trending below the state’s spring revenue forecast, and the rule of thumb is that for every $1 less in average oil prices over the year, the state’s revenue drops by about $35 to $45 million. Furthermore, the Trump administration's budget cuts have impacted a wide range of areas, including disaster relief funding, social safety net spending, infrastructure and research funding, just to name a few. A 5% pullback in federal funding would punch a $300 million hole in the state’s budget.

Medicaid cuts, which Congressional Republicans are moving forward with after initially claiming they wouldn’t, could also have a disastrous impact on Alaska. They’re going after the $800 billion in cuts – which are largely in service of paying for tax cuts for the wealthy – through questionably effective work requirements, which are really just cuts to Medicaid with more steps. This is because the vast majority of people on Medicaid are already working but may struggle to meet the administrative burden of logging their work. And that’s not to mention the state’s poor track record with complying with federal guidelines on social safety net programs.

The end result may be lower Medicaid spending, but it’ll come at the cost of tens of thousands of Alaskans going without regular access to health care, leaving them to rely on more costly emergency room care.

And then there’s the uncertainty around Gov. Mike “It’s Like Christmas Every Day Now” Dunleavy, whose claims that the Trump presidency would be the panacea for everything that ails Alaska haven’t aged particularly well. He claimed that the budget-boosting boom of resource development would preclude the need to raise new revenue, but it didn't, as expected, come to pass in four months. Instead, the state's budget outlook has only devolved since Trump took office, launching a trade war that sent oil and stock prices tumbling.

Today's the day for him to make a decision on the education funding bill legislators passed by a veto-proof majority last month. The legislation would essentially make the one-time money from last year permanent when accounting for inflation, bump funding for pupil transportation and ban cellphones in schools. The biggest Republican-favored provision in the bill, grants to schools with students who are making progress on reading, is contingent on another tax bill becoming law, which also looks doomed to meet the veto pen.

Everything Dunleavy's said publicly – and privately in closed-door meetings to strongarm school officials into supporting his efforts to entrench a public schooling system of haves and have-nots – suggests that he'd likely spike both bills because he didn't get everything he wanted, but who knows? A veto of the education bill would give legislators an opportunity to override him in these final days of session, while attacking public school funding through other means, such as vetoing funding out of the budget or by vetoing the tax bill after legislators adjourn, would be more logistically tricky for legislators to overcome.

In the big picture, the situation over this session's budget and outlook on essential services like education reinforces what Sen. Lyman Hoffman, D-Bethel, said with this being a transitionary budget. So much of Alaska's current predicament is due to inaction and political paralysis on the part of the state's lawmakers, who are constantly searching for easy and pain-free solutions rather than making meaningful progress on balancing the state's budget through new revenues and/or substantive cuts. But many of those easy answers and pain-free options have run out after nearly a decade of status quo budgeting, and the fiscal cliff seems to be finally here.

As the presentations from Legislative Finance have been telling us for years, the problems Alaska faces with a structural budget deficit really can't be ignored much longer. Legislators will have to finally jump in some direction, whether it be a new dividend formula, new revenues or those elusive cuts the GOP claims are broadly possible. Still, while they're making some motions toward that this year with the Legislature passing the first major tax bill in ages – a bill to direct online corporate income tax to Alaska – the governor has remained stubbornly opposed to progress.

Remember, this is a governor who vetoed a bill raising the minimum age for tobacco because it dared raise taxes on vapes. As much as this new tax bill is a "unicorn" in that it raises taxes on non-Alaska companies, Dunleavy has remained rigidly anti-tax of any kind.

So, while much has changed between January and today that has put a lid on much of the aspirational goals of having two multipartisan majorities in the Legislature, the simple fact has remained that Gov. Dunleavy and his veto pen are still the largest and most difficult barrier to change.

Big changes are coming for the state, and the biggest one will be a change in governor after the 2026 election.

Stay tuned.