Gov. Dunleavy’s first crack at budget ups PFD to $3,000, puts off back payments for another day

Republican Governor-elect Mike Dunleavy answers questions from reporters after announcing his transition team at the Alaska Miners Association conference on Nov. 8, 2018. (Photo by Matt Buxton/TMS)

With just two weeks in office, Gov. Mike Dunleavy submitted his proposed budget a day early a few significant changes made to the one submitted by Gov. Bill Walker on his way out.

The two biggest headliners are an increased Permanent Fund Dividend payout to an estimated $3,000 for 2019 checks and a revised forecast for oil revenue that brings the deficit of the proposed budget to $1.6 billion for the fiscal year that begins in July 2019.

The revised revenue forecast pins the average barrel of oil to be at about $64 for the upcoming fiscal year where the Walker administration had forecasted $75, a number that even the Walker administration conceded at an Nov. 26 Anchorage Chamber of Commerce meeting was overly optimistic given recent changes in the market.

The Walker budget, based on a $75 barrel of oil, contained a surplus that his budget team said would exist down to an average of about $70 per barrel.

The news release announcing the budget’s release takes plenty of swipes at Walker’s administration, saying today’s submitted budget is “simply to meet the statutory deadline and, to demonstrate its ongoing commitment to be honest with Alaskans about the state’s budget shortfall.”

There are little other changes in the budget compared to the one submitted by Walker. For example, increases to the University of Alaska system have remained in Dunleavy’s submitted budget and Dunleavy’s budget for the Department of Public Safety also remains the same.

More now, and more later… maybe.

The one big change, of course, is the restoration of the 2019 PFD to the calculation used before Walker and the Legislature reduced the budget first through veto and later through legislation. The $3,000 dividends amount to a roughly $1.9 billion spend out of the Alaska Permanent Fund’s earnings reserve account.

Dunleavy’s budget keeps in place the Alaska Permanent Fund restructuring passed by the Legislature earlier this year, which intentionally didn’t specify in law the split between government spending and the dividend, meaning the remaining $1 billion from the statutory draw will go to the state’s general fund.

What’s not included in this budget is Dunleavy’s promise of returning the dividend payments cut by Walker and the Legislature, which would bring the total payout to an estimated $6,700.

Dunleavy will be relying on the Legislature to get that done through a separate bill or appropriation, according to Department of Revenue commissioner Bruce Tangeman.

“Obviously, that’s not included in the FY20 budget, so that will be dealt with in a different appropriation bill or a different manner,” Tangeman told the Anchorage Daily News.

Whether the back payments are included in the budget or pushed through as a separate piece of legislation will be a tall task for the Legislature, which has already voted twice to reduce dividends and passed the restructuring earlier this year.

Why it matters

With less money for state government from the Alaska Permanent Fund, a more bearish outlook for oil prices and an outright refusal to consider any new revenue sources (beyond new resource development, which, you know, takes years to get rolling), there’s big cuts in store for Alaska’s budget.

Any proposed increases to things outside Dunleavy’s campaign promises of tackling crime and increasing the dividend are likely to be axed, like Walker’s additional funding for the University of Alaska.

The administration can submit revised budget up until 30 days into the Legislative session, which is Feb. 15.

“All items of state expenditures are on the table,” said Office of Management and Budget Director Donna Arduin in a prepared statement. “The state must learn to live within its means and we get there by making the tough spending choices.”

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