Correction: Apparently dividing $1,300 by half in my head is trickier than I thought. It’s $650, not $750.
The Legislature’s budget negotiators have settled on a lower annual cash payout to Alaskans than the $5,500 approved by the Senate earlier this month and was rejected by the House over the weekend.
Instead, the payout produced by budget negotiators from the House and Senate stands at a maximum of $3,850 split between a $1,300 energy rebate check and a roughly $2,550 dividend, which is equivalent to the 50-50 proposal that Gov. Mike Dunleavy and others have called for in recent months. It, however, ties $650 of the energy rebate payment to a vote that has been near-impossible to secure in recent years.
“We’ve got a good budget that’s balanced,” said Sen. Bert Stedman, the Sitka Republican who co-chairs the Senate Finance Committee and led the budget negotiations. “A good, healthy dividend. A lot of capital to go around the state and a lot of attention to both education, both university and K-12, along with a lot of assistance to our communities. Pretty balanced.”
The proposed payout is quite a bit lower than what was produced by the Senate—which opted for both the $1,300 energy rebate and a dividend according to the statutory formula at a total cost to the state of $3.6 billion—but still vastly larger than the dividends paid out in recent years. The increased spending, which includes much more capital spending and higher spending on K-12 education, has largely been made possible by extremely high oil prices that have been driven by Russia’s invasion of Ukraine.
Whether the state can bank on that revenue in the long term, though, drove much of the consternation with the large cash payouts and other spending. While some argued that the money was there to be spent, others like Sen. Stedman argued that it’d be wise to put some portion of the state’s windfall into savings. The budget that passed the Senate, however, was one of the largest ever approved by the Alaska Legislature, requiring oil to both stay high and to draw additional money out of savings.
Sen. Bill Wielechowski, an Anchorage Democrat who’s been about as hard-line on the dividend as anyone, said the amount came about as close as it was going to a full, statutory PFD.
“It’s the best that could be done in my opinion,” he said.
The change in the dividend, which takes that spend from $2.7 billion to $1.6 billion (the energy rebate is about $840 million, brings the budget into the range where it balances without additional spending from savings as long as oil prices stay strong throughout the next fiscal year.
But in case oil does crash, the budget approved today looks to secure a backstop in a vote to access the Constitutional Budget Reserve. Half of the energy rebate—about $420 million—is contingent on the Legislature achieving the three-quarter vote threshold in both chambers to access the funds. This vote has proved impossible to secure as Dunleavy-aligned Republicans have sought to use it as a cudgel over the size of the dividend, leading to a the annual CBR sweep becoming an annual problem.
Without that vote, the total payment would be reduced by $650, bringing the total payout down to about $3,200.
The House and Senate are expected to vote on the conference committee report on Wednesday, the final day of the regular session.
Other key items from today’s hearing
- $57 million in supplemental one-time funding for K-12 education.
- $394 million to refill the Higher Education Investment Fund, an endowment fund that pays for university scholarships and the state’s participation in the medical education program WWAMI. The funding is contingent on the passage of legislation that would formally protect the fund from the annual sweep, HB322 that is currently near passage.
- One of the few cuts approved is $350,000 for Medicaid-funded abortions, which comes along with contingency language that could allow the state to further restrict funding depending on the outcome of the U.S. Supreme Court’s effort to overturn Roe v. Wade.
- Maintains the oil tax credit payment system proposed by the Senate, which would pay out a maximum of $349 million in tax credits if oil stays high. The amount paid would fall with oil prices. There’s an additional $60 million unaffected by oil prices.