State Government

On Friday, the Alaska Senate’s finance committee finished work on a draft state operating budget for the coming year and sent the draft ahead to a vote of the full Senate.

Senators are scheduled to begin debating amendments on Monday, with a vote on the draft expected later in the week.

The committee’s draft is $384 million less than a version passed by the House in April and $1.7 billion less than Gov. Mike Dunleavy’s proposal for the fiscal year that starts July 1 and runs through June 30, 2026.

Most of the cuts came from the 2025 Permanent Fund dividend. Dunleavy proposed a payout of about $3,900 per recipient, and the House reduced that to about $1,400. The Senate’s latest draft has it at $1,000.

The budget arrived in the finance committee with a substantial deficit, and it leaves with a surplus of between $100 million and $200 million, using only numbers in various budget bill drafts to date.

That surplus is almost certainly an illusion, the committee’s two leading members warned.

Sens. Lyman Hoffman, D-Bethel, and Bert Stedman, R-Sitka, said that lawmakers next year are likely to face a significant deficit, somewhere between $300 million and $600 million at current estimates.

“We argue that this is sort of a transitional budget, getting prepared for the headwinds that we’re going to face,” Hoffman said.

The upcoming budget is based on a state forecast from March that predicts North Slope oil prices will average $68 per barrel in the coming fiscal year. Since that forecast was released, futures markets have plummeted, so much so that the Department of Revenue later approached the co-chairs with concerns, Hoffman said. When spending exceeds revenue, lawmakers must make up for it with a supplemental budget bill in the next legislative session.

“It may be as low as $64, which will mean a potential supplemental (bill), if that’s the case, of an additional $150 million, estimated,” Hoffman said.

On top of that are several large union contracts that remain under negotiation. Pay and benefit increases are expected after a salary survey found significant numbers of state employees are underpaid.

“They may be between $100 million and $300 million,” Hoffman said.

Then add the federal government programs cut because of DOGE, Hoffman said. That White House office has been slashing federal programs and spending. If the state were to lose 5% of its federal funding, keeping programs alive would cost as much as $300 million.

Then there’s fire season to consider, he added.

“If it’s higher than an average year, which may happen, we could see a substantial hit on the state’s coffers. So you know, I and others in the Senate are concerned,” Hoffman said.

He added that there’s yet another area of concern.

“We’re using north of $100 million in one-time funds in this year’s budget that aren’t going to be available next year,” Hoffman said. “So that is why we may have a gap of between $300 million and $600 million next year.”

Legislators have removed the possibility of closing the budget gap with new revenue — opposed by some key House members — or spending from savings, opposed by Senate leaders who say it wouldn’t be sustainable.

Stedman referred to the temporary budget surplus as a “buffer” that likely would be consumed by expected cost increases. “We’re a little cautious,” Stedman said.

Some of that buffer could be consumed later this year as members of the House negotiate with the Senate on a budget compromise that integrates parts of the Senate and House drafts.

Stedman said he hopes there will be few items added back into the budget.

“The fact of the matter is,” Hoffman said, “at some point, the message needs to be that we can’t continue as we are.”

Donald Trump’s return to the presidency has buoyed hopes for the 800-mile, $44 billion Alaska LNG pipeline project. And the project has taken some important steps forward in recent months.

But you’d be forgiven for being skeptical. Alaskans have dreamed for decades of a line that would bring the North Slope’s immense gas reserves south for export.

But there’s a reason it hasn’t happened: Nobody has wanted to pay for it.

So, is a gasline more likely than ever? Or is this déjà vu all over again?

Suffice it to say that Gov. Mike Dunleavy was encouraged when he heard Trump call out the gasline project: “My administration is also working on a gigantic natural gas pipeline in Alaska,” the president said in a speech to Congress back in March.

“Yes!” Dunleavy said in response, in a video his office posted to social media.

The video shows the governor watching Trump on a smartphone, offering color commentary and raising his fist in agreement. There’s some cheery acoustic guitar music in the background, a take on The Beatles’ “Here Comes The Sun.”

There is plenty to be excited about.

The state agency shepherding the gasline project has signed an agreement handing it off to a private developer for some final engineering design work. They’re hoping to get to an investment decision around the end of the year.

Dunleavy, after a trip to Asia earlier this year, came home with a nonbinding letter saying a Taiwanese state energy company is interested in buying gas from the project.

And, of course, the president has said it’s a priority — so much so that his administration is planning an Alaska summit with Asian leaders — potential gas-buyers — in early June.

So a lot of folks are saying things like this, from House Minority Leader Mia Costello, R-Anchorage, at a House Resources Committee meeting on April 30.

“After years of uncertainty, planning and perseverance, the AK LNG project is no longer just a vision,” she said. “It’s closer than ever to becoming a reality, thanks to significant progress in permitting, global interest and most importantly, renewed momentum from the federal government.”

The project, though, faces a lot of the same barriers it’s always faced. It’s hard to build a pipeline from the Arctic, never mind an 800-mile one. You have to have enough customers for the gas lined up for anyone to throw down the billions and billions of dollars it’ll take to get it built. The cost was last estimated at $43.8 billion in 2023, according to the Alaska Gasline Development Corp., the agency behind the project.

So Rep. Zack Fields, D- Anchorage, doesn’t want Alaskans to get ahead of themselves. There is one potential buyer who’s put pen to paper. Others haven’t signed on quite yet.

“I just don’t want people to be misled that this is about to happen,” Fields said. “I don’t think it’s extremely likely.”

The project faces opposition from conservation groups, who say extracting more fossil fuels would worsen climate change. But, like a lot of folks in this oil-and-gas-friendly state, Fields said it would be great if the pipeline is eventually built. It could provide some state revenue — though exactly how much isn’t clear — and perhaps lower energy prices for a significant fraction of the state’s residents.

For now, though, Fields said he’s not counting his methane molecules before they come south.

“I think it would be awesome if one of those buyers materializes and buys the gas,” he said. “But that hasn’t happened yet, and until it does, we’re not really in any different situation than we have been for the last 50 years.”

Though there’s still a long road ahead for the pipeline — even in a best-case scenario, gas wouldn’t start flowing until the early 2030s — one has to admit, it’s been a heck of a turnaround.

It was just a year ago that the future of the pipeline project was on the ropes. Lawmakers were frustrated at the gasline agency’s slow progress. They floated cutting its funding and mothballing the project.

One of those frustrated lawmakers was Sen. Bert Stedman, R-Sitka, a co-chair of the powerful Senate Finance Committee. These days, however, he’s more optimistic.

“It was, in my opinion, highly unlikely we’d get a gasline until the Trump administration came in,” he said.

That’s due in part to Trump’s hardball strategy on tariffs and international trade, Stedman said. Japan — one of the places Alaska’s LNG could go — has discussed increasing natural gas imports as a way to shink the country’s trade deficit with the U.S.

But whether that strategy will work, Stedman said, is uncertain.

“It remains to be seen if jawboning Japan and Korea will work to get them to write a check,” he said.

If it doesn’t work, though, Stedman has another idea for how the federal government could help get the pipeline built.

“A big equity infusion,” he said. “You put in $20 billion or $30 billion, or some significant number, to get in and get it built and de-risk it. And then, just sell it once it’s up and built and running and profitable.”

The investment, Stedman said, could even make the taxpayer some money.

A proposal that would create and fund tribally-run public schools inched closer to reality on Thursday. The House Tribal Affairs Committee moved House Bill 59 over to the Education Committee. 

If the Alaska Legislature passes it, five tribes would get close to $17.5 million for the first year to run pilot programs for tribally-compacted schools across the state. Despite the short amount of time left in this year’s legislative session and a nearly $2 billion deficit in the budget, bill authors and supporters are hopeful the program will happen eventually.

Mischa Jackson is a tribal education liaison for the Central Council of the Tlingit and Haida Indian Tribes of Alaska. She said she hopes public support during the legislative process highlights the importance of kickstarting the program sooner.

“I am really hopeful. I think I’m just so passionate about education,” Jackson said. “I truly believe anything is possible, especially as an educator, we can seem to do anything on a whim’s notice and get it done and do it really well.”

Jackson said Tlingit and Haida will move forward with plans for its own education campus even if the Legislature doesn’t approve tribal compacting this year.

The House Tribal Affairs Committee updated the bill with an amendment to shorten the timeframe of the project from Rep. Rebecca Schwanke, R-Glennallen, and sent it to the House Education Committee for consideration.

Rep. Andi Story, a Juneau Democrat, is on both committees and laid out next steps.

“We’d like to bring in some of the school districts from the area where the tribal schools will be, and just talk about issues, about how it will affect districts and if anything should be done,” she said.

Joel Isaak is a consultant for tribal compacting with the Alaska Department of Education and Early Development. He said the state and tribes will continue working on the program even if the bill doesn’t pass this year.

“We’re hoping the Legislature will keep this moving forward, and we’re also willing to keep working at this to make it be the bill that it needs to be – which we feel very strongly, that this bill takes us there, and that the Legislature can keep supporting this effort,” he said.

Washington is the only state that has tribally-compacted public schools. The New Mexico Legislature also passed a bill to create education compacts that was vetoed by its governor last month.

House Bill 59 is expected to be heard by the House Education Committee next Wednesday.

Amid a severe state budget deficit, the Alaska Senate Finance Committee is proposing the lowest Permanent Fund dividend in five years and — if adjusted for inflation — the lowest dividend ever.

On Thursday, the committee unveiled a new version of its proposed state operating budget with a $1,000 dividend, a $400 reduction from its first draft.

That cut reduces the Senate’s budget draft by $265 million, likely balancing it once additional legislation is considered.

The dividend figure is not final: The committee will consider budget amendments on Friday, and the full Senate will vote on the committee’s proposal next week.

If the Senate adopts the $1,000 figure, it would have to be negotiated with the House, which approved a $1,400 dividend in April.

The House’s budget contained a significant deficit, however, and differing policy positions between the House and Senate have left lawmakers with no choice but to cut services and the dividend in order to balance the budget.

The document unveiled Thursday is the committee’s second draft operating budget, and it follows prior drafts from both the House and Gov. Mike Dunleavy.

The new Senate committee draft is $1.7 billion less than the governor’s proposed operating budget and $384 million below the draft approved by the House.

In both cases, the primary difference is the amount of the Permanent Fund dividend.

Dunleavy proposed a dividend of roughly $3,900 per recipient based on the formula in state law, which would have resulted in a $2.1 billion deficit.

He proposed solving that deficit by taking the money from the Constitutional Budget Reserve, the state’s chief savings account. That account contains $2.8 billion, and members of the Senate have refused to spend from the CBR for the coming fiscal year, citing the prospect of larger deficits next year.

Alaska’s public schools may get a long-sought increase in state funding this year. A bill that would boost state education funding and make changes to state education policy passed the state House and Senate Wednesday and will soon head to Gov. Mike Dunleavy’s desk.

House Bill 57 would provide a $700 increase to basic per-student state education funding, the base student allocation, a longtime priority for the bipartisan coalitions who control the House and Senate.

Billed as a compromise, the package would also limit student cellphone use during school hours, make a number of changes to the laws governing charter schools, and — if lawmakers pass an otherwise unrelated tax bill — create a new incentive program that would provide school districts with $450 for each young student who reads at grade level or demonstrates improvement.

Any leftover revenue brought in by the tax bill, which would expand corporate income taxes to include non-Alaska companies who do business in the state over the internet, would be put toward career and technical education.

“This bill supports all public schools: brick-and-mortar, charter, homeschool, correspondence and residential,” said minority Sen. Mike Cronk, R-Tok.

Senators voting against the bill said they were worried the tax bill may not pass into law. Though Senate Minority Leader Mike Shower, R-Wasilla, said he would advocate for the tax expansion, he said the uncertainty led him to oppose the bill.

“I want to know that I’m voting for something that is going to do what I think it’s going to do, and I can’t guarantee that as I stand here today,” Shower said.

Wednesday’s vote started with a redo: senators approved a very similar bill on Monday, but discovered what Senate President Gary Stevens, R-Kodiak, called a “drafting error” before the House could vote on the measure. Senators deleted the errant amendment and approved a very similar replacement to it before approving the bill 17-3 Wednesday afternoon. Shortly afterward, the House passed the bill 31-8.

The votes in the House and Senate crossed caucus lines, with 3 minority Republican senators and 10 Republican House members joining all members of the bipartisan coalitions who control both chambers.

It’s unclear whether Gov. Mike Dunleavy will sign or veto the bill. Dunleavy’s education commissioner, Deena Bishop, emailed superintendents on Monday and asked them to urge their legislators to modify the bill to align with Dunleavy’s priorities. Though lawmakers added several policy initiatives proposed by Dunleavy to the bill that passed, they declined to add additional funding for correspondence schools or implement a statewide open enrollment policy.

“If these critical reforms are not included, we risk repeating the challenges of previous years when the education bill — and its funding components — were vetoed,” Bishop wrote.

Bishop’s email was first reported by the Anchorage Daily News and confirmed by Alaska Public Media.

Bishop also raised the possibility that Dunleavy could use his line-item veto power to delete funding from the state budget that would allow for the $700 funding increase. Dunleavy used a veto to reduce one-time funding lawmakers approved for schools in 2023, but he has not vetoed the long-term funding specified by the base student allocation.

Dunleavy’s office declined to say whether the governor will sign the bill. His communications director, Jeff Turner, instead pointed to a nearly week-old social media post discussing a prior version of the bill that called for lawmakers to make “a few key edits.” Lawmakers have since amended the bill to address some, but not all, of his priorities.

“The governor’s last statement on the bill … still stands,” Turner wrote.

Lawmakers may not need Dunleavy’s consent for the bill to become law. It takes a two-thirds majority to override a veto, a total of 40 votes across the House and Senate. If all 48 legislators who voted for the bill support an override, they would have enough votes, even at a higher three-quarters threshold that would be necessary if Dunleavy vetoes funding for the bill.

“I am confident that we’re going to get this bill past the finish line,” Sen. Löki Tobin, D-Anchorage, said in an interview after the vote.

Several minority lawmakers, including some conservative Republicans, said they would vote to override a veto from the governor if it became necessary, including Sens. Robert Yundt, R-Wasilla, Mike Cronk, R-Tok, and James Kaufman, R-Anchorage, and Reps. Justin Ruffridge, R-Soldotna, and Sarah Vance, R-Homer.

Vance said she planned to ask Dunleavy not to veto the bill, saying she thought the reforms included in House Bill 57 would benefit the state’s struggling schools. But she said she would support an override if it came to that.

“I don’t want to, but I’m willing if necessary,” Vance said.

Some other lawmakers who voted for the bill, including House Minority Leader Mia Costello, R-Anchorage, declined to say whether they’d vote to override the governor.

“We don’t know what’s going to happen,” she said. “I mean, this is the process, and I would rather not comment on that at this time.”

Once the bill is transmitted to his office, the state Constitution provides him 15 days, excluding Sundays, to sign or veto it. Otherwise, it becomes law automatically.

House Speaker Bryce Edgmon, I-Dillingham, said he expected the bill to go to the governor in short order. He said he was confident the bill would become law one way or another.

“We are going to get something through this year, and we will override the governor if he chooses, at this time to, on a second occasion, veto the bill,” Edgmon said. “I would hope … that the governor respectfully takes heed of the broad support behind the measure that just passed both bodies, and if he doesn’t, there will be a veto override vote.”

But a veto could scramble the dynamics. Last year, after lawmakers approved Senate Bill 140, a similar education funding and policy package, on a 56-3 vote, they fell one vote short of overriding Gov. Mike Dunleavy’s veto.

“I really hope we learned our lesson from that,” said Ruffridge, who voted to override last year’s veto. “It’s good for us to make sure that we don’t vote yes on this if you don’t plan on voting yes again.”