Low oil prices have shattered large gaps in the Alaska budget for the state the Department of Revenue said Tuesday in announcing new estimates that show the state’s budget deficit to be around $220 million for the fiscal year that ended June 30, and a deficit of $240 million for the year that begins July 1.
State legislators have already signed a deal to borrow from savings in order to pay for the current deficit, by borrowing on the state’s Constitutional Budget Reserve, they announced on Tuesday, but it’s not clear yet what they’ll do to address the deficit for the coming fiscal year.
Members of the majority Republican House majority coalition already took an important move to rectify the situation by announcing the reduction of the Permanent Fund dividend from the amount suggested by Governor. Mike Dunleavy in December.
In the governor’s initial proposal for the budget which begins July 1st, the deficit could be between $890 between $920 and $890 million based on the estimation employed. Alexei Painter, director of the non-partisan Legislative Finance Division, and Neil Steininger, director of the governor’s Office of Management and Budget provided different estimates.
On Monday on Monday, on Monday, the House Finance Committee proposed a new budget plan that reduces the proposed governor’s $3,860 per individual dividend to around $2700 per person. This reduces the expected deficit to around $240 million.
The figure doesn’t take into account the estimated $250 million cost for a planned boost in the per-student state funding calculation for schools K-12 as well as any renovation or construction projects that are typically included in the budgets of legislators each year. The items weren’t mentioned in the governor’s budget proposal and were not part of the House budget.
Rep. DeLena Johnson a Republican from Palmer and vice-chairperson of the House Finance Committee, said on Tuesday that more steps will be announced soon.
The smaller revenue forecast she added “is the big elephant on the block.”
Before lawmakers can eat the elephant in the fiscal years 2024 and 2023, lawmakers will be required to handle the one that’s in the fiscal year 2023 that will end on June 30.
Legislators usually include in their budgets a clause that states that the deficits will be compensated through the state’s Constitutional Budget Reserve, but the budget they passed last year does not contain this language, instead stating that any deficits will be filled with the state savings account, which is simpler to access that is known as the Statutory Budget Reserve.
The account is only holding about 20 million dollars, Painter informed members of the Senate Finance Committee earlier in the year. That’s not enough to cover the deficit.
Spending money from the reserve requires three-quarters majority of the Senate and three-quarters of the House to be in agreement.
Bipartisan Senate majority is comprised of 17 members and, if they all are in agreement, that’s plenty.
“I believe that the Senate would be in favor of a 3rd-quarter voting rights in the CBR not just in ’23 and ’24 but also in the year ’24.” stated senator. Bert Stedman, R-Sitka and co-chair of the Senate Finance Committee.
In the House the majority coalition consists of only 23 members . Not every member is required to vote as a group. So, it is the vote of 16-member minority caucus is needed.
A bill introduced by Dunleavy to fund state expenditures until June, dubbed the “fast-track” additional bill is advancing across the Legislature.
House Minority Leader Calvin Schrage, I-Anchorage, stated that if the fast-track bill is not amended prior to it’s finalized — although floor amendments could be possible the majority is ready to vote in favor of voting on the Constitutional Budget Reserve vote.
“We’re going to conduct the necessary research to make sure that it’s secure and has was properly tucked in however, if it’s then I’m going to get our caucus to be supportive of CBR.” CBR,” Schrage said.
Gov. Mike Dunleavy, speaking to journalists on the streets of Anchorage the previous day, stated that there are no problems in making use of the CBR to help pay for the deficit for this fiscal year.
The CBR is only around $2 billion. The state utilizes it to control the fluctuation in cash flow. If its balance falls to a significant extent, there may be issues, state accountants have advised.
When asked about how the state would tackle the deficit for financial year 2024 Governor was unambiguous. He claimed there would be discussions on cuts, as well as discussions about the possibility of new revenue sources and, at present the decision is the responsibility of the Legislature.
“And that’s why the actual process of creating this budget kind of starts right now,” he said.
This article was originally published within the Alaska Beacon and is republished here with permission.
