June 29

By Iris Samuels

Alaska Gov. Mike Dunleavy signed a $14.4 billion budget Tuesday, vetoing $400 million from the spending plan advanced by the Legislature last month and promising that the plan would leave enough savings to account for a potential drop in oil prices after they spiked this year.
The budget, which goes into effect July 1, will send around $3,200 in payments to Alaskans that include a one-time $650 energy relief payment and a $2,550 Permanent Fund dividend. The governor said he had not yet determined a plan for disseminating the money to Alaskans, leaving open the possibility that the money or some of it would go out before the usual October dividend delivery date.

Alaska Senate Democrats called on the governor to issue the payments “immediately” to help address high energy costs.
Dunleavy, a Republican running for reelection this year, called the plan “a great budget for Alaska.” The budget relies on an oil revenue windfall into the state treasury to provide public education investments and funding to municipalities not seen in previous years of Dunleavy’s tenure.

“We’re able to invest in the areas of the government that I think most people believe we should be and that’s public safety, that’s education, that’s research, that’s infrastructure. And so our view is that this is a responsible budget give our current situation with our revenue from oil,” Dunleavy said during an Anchorage news conference.
If oil prices remain at current projections, the budget would leave enough money to cover forward-funding for education for the following fiscal year, according to Neil Steininger, director of the Office of Management and Budget. In a revenue outlook update released June 20, the Alaska Department of Revenue predicted the price per barrel of oil in the coming fiscal year to be $111, up from $101 in the spring forecast released in March.

The governor said he expected enough money to go into savings, thanks to high oil prices, to cover budget needs in the following fiscal year even if oil prices plummet in the coming months. If revenue projections hold, the budget would put around $1.6 billion in the Constitutional Budget Reserve.
“We’re saving enough money and we’re endowing enough and forward funding education, that if the price of oil dropped dramatically, even into the 20s, it’s our estimate that we can actually — through the savings of these endowments and forward funding — fund our budget for another year,” Dunleavy said.

If the oil price per barrel drops below $103, the Constitutional Budget Reserve deposit would be eliminated. If the price drops below $89, forward funding of education would no longer be possible, according to Dunleavy spokesman Jeff Turner.

The budget will also pay off oil tax credits inherited by the Dunleavy administration, a bill left over from a now-defunct subsidy programs for oil and gas drilling an exploration.
Dunleavy vetoed around $400 million from the budget forwarded to him by the Legislature last month, including $62.5 million for deferred school maintenance projects, $22.5 million for deferred statewide maintenance projects, and $89.3 million in retirement funds for state employees.

“Although we have a windfall … we also want to make sure that we’re holding back enough money that in case oil does drop, which it does occasionally — it doesn’t always go up — that we have money in savings,” Dunleavy said, explaining his decision to veto millions in deferred maintenance funding.
The $400 million in vetoes were met with acceptance from some of the governor’s frequent detractors — a far cry from the outrage that has resulted from vetoes in previous years when less money was available for state services and capital projects.

Alaska House Speaker Louise Stutes, R-Kodiak, who leads a majority coalition comprised mostly of Democrats, said she was “pleased” that the governor agreed with the work of the coalition, but that she was “disappointed that there were vetoes to projects and grants that really matter to Alaskans.”
Alaska Senate Democrats bemoaned slashed funding for the Alaska Long Trail to the tune of $10.5 million, $1.5 million for public broadcasting, and $27 million in deferred maintenance for the University of Alaska.

”No one gets everything they want in a budgeting process, but the negotiation process was fair,” said Senate Minority Leader Tom Begich, D-Anchorage, in a statement.
Still, some were dismayed. Independent candidates for governor and lieutenant governor Bill Walker and Heidi Drygas blasted Dunleavy for what they called “a series of unnecessary and harmful cuts.”

“At the same time he was slashing funds for schools, grants to support elders and people with disabilities, and our university system, he was giving friends pay raises, signing contracts with supporters, and ballooning his own office budget by 28 percent,” said Walker in a statement.
Democratic gubernatorial candidate Les Gara also criticized Dunleavy over the budget vetoes.

“Without Russian blood money next year, he’ll be back to job-killing construction budget that keeps people out of work,” Gara wrote on Twitter, alluding to the impact of Russia’s war in Ukraine on rising fuel costs. “His PFD promise has been false all along. He’s never proposed a way to fund it (without) war money.”
Dunleavy campaigned on sending Alaskans a full statutory Permanent Fund dividend. He later called for the Legislature to advance a constitutional amendment changing the way the dividend amount is calculated. Such an amendment would then go to a vote by Alaska voters.

The Legislature briefly considered late in the legislative session sending Alaskans $5,500 in payments, but ultimately settled on the $3,200 payments. Nor did the Legislature advance a change to the statute or the constitution to clarify how future dividend amounts would be calculated.

“We should have followed the statute. If not, we need to change the statute. But when we change the statute, the people of Alaska need to be part of that through a constitutional amendment,” said Dunleavy on Tuesday. “We have to get back to where we follow the law.”