State Government

There’s a nearly 50-50 chance that the Alaska Permanent Fund won’t have enough spendable money to pay dividends and the state’s bills at least once over the next decade — unless lawmakers change the structure of the fund to function more like a university endowment.

That’s the message Permanent Fund leaders and the Legislature’s chief budget analyst delivered to lawmakers on Tuesday.

The head of the Legislature’s nonpartisan budget analysis agency, Alexei Painter, presented lawmakers with a financial model showing a 46% chance that the fund’s spendable account would not have enough money to provide a payment to the state’s general fund that makes up the second-largest overall source of state revenue — second only to the federal government.

Permanent Fund Corporation Executive Director and CEO Deven Mitchell and Board of Trustees Chair Jason Brune told the Legislative Budget and Audit Committee that the issue is not with the $80-plus billion Permanent Fund itself, but with the fund’s two-account structure.

“We want to ensure that there’s an ability to provide a payment to the state of Alaska each and every year,” Mitchell said. “We don’t want to have a 46% probability of failure. We don’t want to have any probability of failure for this revenue stream at this point.”

The Permanent Fund is separated into two accounts. The $60 billion principal can’t be spent without a vote of the people.

The earnings reserve account, which has about $9 billion in spendable money, is more flexible. Legislators could spend every last dollar of the account — and possibly more in unrealized gains — by a simple majority vote.

Lawmakers have drawn 5% of the fund’s value every year to fund dividends and state services since 2018 after oil prices crashed in the mid-2010s. Today, the Permanent Fund provides more than half of the state’s general-purpose revenue.

This year, lawmakers are considering amending the Alaska Constitution to combine the two accounts into one.

That would solve the problem, Painter said.

“The [earnings reserve account] balance would no longer be something that would stop us from continuing to draw,” he said. “That would reduce the risk to zero. There’d be no risk at all.”

Lawmakers in the largely Democratic majority caucuses in the House and Senate have introduced amendments that would combine the accounts. Minority Sen. James Kaufman, R-Anchorage, has introduced a similar proposal.

The amendments would also place a constitutional cap on the annual draw. The current 5% cap is set in statute, but lawmakers could vote to ignore the law by a simple majority.

A pair of similar proposals sponsored by the Senate Finance Committee and Rep. Calvin Schrage, I-Anchorage, would constitutionalize the current 5% maximum draw rate.

Kaufman’s proposal would cap it at 5.5% to provide what called “headroom,” though he said at a news conference Tuesday that he was open to changing the maximum figure. It would also require the state to pay a dividend set by a formula set in law, though the proposal is silent on what the formula should be. Kaufman is a cosponsor of a bipartisan bill that would set the dividend at 25% of the state’s annual draw from the Permanent Fund.

Brune, the Permanent Fund board chair, said combining the two accounts and capping the draw would provide “predictability and sustainability” for the fund going forward.

Sen. Bert Stedman, R-Sitka, said limiting the draw with a constitutional amendment would prevent lawmakers from raiding the fund when facing a deficit. Lawmakers are currently looking for ways to fill a more than half-billion dollar hole in the state’s budget.

“The little piggies in the trough are getting hungry in this building,” he said.

Stedman, a co-chair of the powerful Senate Finance Committee, has suggested on more than one occasion that the 5% draw rate may be too high to be sustainable.

Combining the accounts and capping the draw is broadly popular among senators in both the largely Democratic majority and the all-Republican minority. The Permanent Fund’s board has been pushing to combine the accounts for decades. Last year, they published a rare analysis paper illustrating the importance of the concept.

Lawmakers could place a constitutional amendment on the ballot for the next election with a two-thirds majority vote in the House and Senate. The governor would not be able to veto it.

State House leaders unveiled a revised high-priority education funding bill on Wednesday ahead of a floor debate in the full House tentatively scheduled for Monday.

The latest version of House Bill 69 includes a $1,000 increase to basic per-student funding for public schools next year, but it leaves out further increases and inflation-proofing included in earlier drafts of the bill.

Instead, the new version advanced by House lawmakers includes a number of policy provisions that leaders hope will be enough to avoid a veto from Gov. Mike Dunleavy.

“Progress is real and inspiring on education right now. It is fragile and incomplete, but we’re moving forward,” said House Majority Leader Chuck Kopp, R-Anchorage.

Boosting state funding for public schools is a top priority for the largely Democratic bipartisan coalitions that lead the state House and Senate. Caucus leaders have said repeatedly that they’re pushing to pass the education bill on an accelerated timeline in an effort to provide certainty to school districts currently working on their budgets.

The first draft of the bill included no policy reforms. But Dunleavy has said repeatedly, including on a talk radio show last week, that he won’t sign an education funding increase unless it’s paired with reforms aimed at boosting student performance.

Some of the provisions integrated into the new education bill are similar to those proposed by Dunleavy earlier this year.

One is a three-year trial of a statewide open enrollment policy, which would allow students to apply to attend any school in their school district. Local school boards would be tasked with determining the capacity of each school, and spaces in each school would be allocated through a lottery system, with priority given to siblings.

Another would require school districts to regulate — but not necessarily ban outright — student cell phone use on campus, with exceptions for things like translation or emergency use.

The bill would also make a variety of changes to the laws governing charter schools, including one that requires school boards to make their charter schools’ periodic renewal processes “as simple as possible” and another that would speed the appeal process for new charter school applications denied by a local school board.

Minority Republican lawmakers offered four amendments, three of which were defeated in a 4-3 vote along caucus lines.

But Kopp, the majority leader, unexpectedly split with his caucus to add another significant change to the bill initially proposed by Dunleavy: a grant program that would provide school districts a $450 incentive for each student who reads at grade level or demonstrates improvement. Dunleavy proposed the grant program in January, despite vetoing a similar reading-focused funding boost last year.

House Minority Leader Mia Costello, R-Anchorage, who proposed adding the grant program to the new bill package, said it was an effort to achieve the goals of the governor’s 2022 Alaska Reads Act.

“I think that it is incumbent upon the Legislature to support a program like this,” she said. “Students who are not able to read are not set up for success in life.”

The bill does not include two other priorities proposed by Dunleavy that dominated legislative debates over education funding last year — a policy change allowing the state Board of Education to directly approve new charter schools and a teacher retention bonus program that would pay up to $15,000 per teacher per year. A dispute over those provisions led Dunleavy to veto a smaller school funding increase last year.

It also leaves out changes to the state’s funding formula Dunleavy proposed this year that would add funding for correspondence students and vocational education.

Rep. Rebecca Himschoot, I-Sitka, said leaders were hoping to find a deal everyone could get behind.

“The goal is to find the places that we can agree on that hopefully get us to a bill that works for everyone,” she said.

Lawmakers have been negotiating with the governor’s staff in an effort to avoid a repeat of the 2024 veto.

But where the governor stands on the bill at the moment is unclear. His spokesperson, Jeff Turner, declined to share the governor’s thoughts on the bill Wednesday afternoon.

“Bills can and do undergo significant changes before being transmitted to the governor,” he said. “For that reason, we withhold comment until the bill arrives in the governor’s office and he has had time to review it.”

But asked whether the governor had an agreement with lawmakers on a package he would support, Turner said “discussions on education funding are ongoing.”

One place the bill might change, assuming it passes the narrowly divided House, is the Senate. Senate Education Committee Chair Löki Tobin, D-Anchorage, said she was especially skeptical of the open enrollment provision.

“If you have a neighborhood school, do you have an automatic seat there, or all those seats up for up for the lottery structure? I don’t know, and I think that is a big open question that we need to have answered,” she said, though she stopped short of calling any policy provision in the bill a non-starter.

The state’s dire fiscal picture could also complicate the bill’s future. Senate leaders said Tuesday they weren’t sure the state’s deficit-ridden budget could support both a $1,000 increase in basic per-student funding and senators’ desire to pay a roughly $1,400 Permanent Fund dividend.

The increase to the base student allocation, the largest part of the state’s public school funding formula, is estimated to cost roughly $253 million. The reading grant program would add another roughly $22 million to the bill’s expected price tag.

Meanwhile, the state is facing budget deficits in excess of half a billion dollars to maintain essentially the status quo, Senate Finance Committee Co-Chair Lyman Hoffman, D-Bethel, said at a news conference on Tuesday ahead of the bill’s release.

“Before we start spending money that we don’t have, we should be looking at raising money to pay for programs that we passed last year and look at those that we can pass in the future,” he said.

Senators have proposed bills that would reduce oil tax credits and subject some privately-owned oil and gas companies to corporate income taxes, but it’s unclear if those measures can garner support from lawmakers in the House, never mind a frequently tax-averse governor.

Some House lawmakers have suggested balancing the budget by reducing the PFD and drawing from the state’s rainy day fund, the Constitutional Budget Reserve.

Alaska’s state development agency is ending a two-decade partnership with the operator of the Ketchikan Shipyard, throwing into question the future of the multimillion-dollar state facility.

The Alaska Industrial Development and Export Authority notified Vigor Alaska last week that it would not exercise the final ten-year extension to its public-private partnership with the company. AIDEA cited poor performance by the operator as its reason for ending the agreement in a four-page letter to Vigor dated February 28.

“After reviewing Vigor’s long-term economic performance, projections, extensive studies, repair budgets, and other documentation relating to the Shipyard, AIDEA has reasonably determined that Vigor has not demonstrated its ability to fully utilize all of the Shipyard’s economic capabilities,” AIDEA Executive Director Randy Ruaro wrote. He also cited “inadequate” contributions to a repairs and maintenance account.

Vigor’s agreement with AIDEA will expire at the end of November, though Ruaro said AIDEA was “willing to discuss” extending the end date to March 1, 2026.

Ruaro and AIDEA’s deputy director did not respond to interview requests. The Ketchkan Shipyard is one of six projects the agency owns outright. The federal and state governments have spent a combined $80.1 million on the facility, according to AIDEA.

Vigor took over operations when it acquired Alaska Ship & Drydock in 2012, later overseeing construction of the state’s two so-called Alaska Class ferries, the Hubbard and the Tazlina. The yard also maintained state, local and federal government vessels.

The news came as a surprise to Vigor, a spokesperson said in a statement.

“AIDEA’s unexpected announcement impacts nearly 100 family-wage jobs in Ketchikan, with no clear understanding of who might take over or whether the facility will even continue to operate as a shipyard,” Vigor Public Affairs Director Benton Strong wrote.

Local officials in Ketchikan say the news took them by surprise, too — but they say tensions between AIDEA and Vigor have been simmering for some time.

“There’s been a lot of conversation over the years about the performance from the yard,” Rep. Jeremy Bynum, R-Ketchikan, said in an interview.

The AIDEA letter cites declining employment at the shipyard as evidence the facility was operating below its full potential. Despite what the agency describes as an “uptick” in staffing last year, over the past decade, the number of full-time jobs at the yard dropped from more than 150 in the mid-2010s, while the Tazlina and Hubbard were under construction, to less than 80 in the early 2020s, according to the letter.

“Halving the number of jobs at the Shipyard over a decade is strong evidence that Vigor is not fully utilizing the Shipyard’s economic capabilities,” Ruaro wrote.

AIDEA also takes issue with the shipyard’s poor financial performance and large maintenance and rehabilitation backlog, according to the letter. The agency says it has seen a payment in only two of the nine years that a profit-sharing agreement has been in place, despite what Ruaro called “significant tax and utility subsidies, and a major advantage in the structure of the Agreement itself.”

Still, Vigor argues it did a better job running the yard than any operator before it.

“Vigor has been a strong operator of the Ketchikan Shipyard, investing millions in the facility, employing more people and generating more revenue than any previous operator, and triggering profit-sharing with AIDEA for the first time in the yard’s history,” said Strong, the Vigor spokesperson.

What the future holds for the shipyard, a major employer in Ketchikan and the only facility of its kind in Southeast Alaska, is uncertain. Ketchikan Gateway Borough Mayor Rodney Dial said in a phone interview he hoped to “make the best of a bad situation.”

“We’ll do everything we can to assure there’s an orderly transition and that the jobs are protected,” Dial said. “We’ll also push for whoever comes in behind Vigor to really have a plan to expand that facility and maximize its use and return on investment for the community.”

Whether nine months — or a year, if the agreement is extended — is enough time to find a new operator to take over the industrial facility is unclear. But Doug Ward, a former Vigor Alaska executive who worked to expand the facility and is the namesake of the shipyard’s assembly hall, said in a phone interview that he’s optimistic a new operator will be able to take over the facility without a significant interruption to the shipyard’s operations.

“We have some very capable operators in the state that are Alaska businesses and would make outstanding operators of the Ketchikan Shipyard,” he said.

Alaska Gov. Mike Dunleavy on Friday proposed a constitutional amendment that would give future governors more latitude when picking judges for the Alaska Court System.

If adopted by the Legislature, the amendment would be subject to a statewide vote in 2026. If adopted by voters, it would take effect after Dunleavy leaves office.

The draft amendment, known variously as House Joint Resolution 12 and Senate Joint Resolution 13, would reduce the role of the nonpartisan Alaska Judicial Council in the judge-picking process.

The council, which consists of three public members chosen by the governor and three members of the Alaska Bar Association, collects applications whenever there’s a judicial vacancy.

The council considers those applications and picks the most qualified people for a shortlist of nominees. If there’s a tie on a particular nominee, the chief justice of the Alaska Supreme Court casts the tiebreaking vote.

The list of finalists, which must include at least two people, is sent to the governor, who makes the final selection.

If the governor’s constitutional amendment were adopted, the council would no longer be able to pick a short list of finalists based on their merit.

Instead, the council would be required to forward every applicant, as long as they met the state constitution’s minimum requirements.

In a statement, the governor’s office said, “This resolution, if adopted by the people of Alaska would compel the Alaska Judicial Council to send all names of prospective judge candidates to the governor for the purpose of selecting judges for openings.”

No hearings have yet been scheduled on the governor’s amendment proposal, which was introduced Friday.

Dunleavy has previously expressed frustration with the judicial selection process.

In 2019, after expressing unhappiness with his options for a Palmer Superior Court vacancy, he did not follow state law, violating the timeline to fill the vacancy. The governor ultimately made a pick, but his violation served as one of three grounds for the unsuccessful campaign to recall him from office.

Two years later, Dunleavy asked the Judicial Council for more options to fill a vacancy on the Alaska Supreme Court. The Council declined to modify its list of nominees, and Dunleavy picked from the original list.

A year later, conservative Republicans made the state’s judicial selection process a key part of their campaign to amend the Alaska Constitution.

That fall, voters were asked whether they wanted to convene a constitutional convention, and those urging a “yes” vote said they felt the Judicial Council held too much power and prevented the governor from approving the conservative nominees he wanted.

On that constitutional question, Alaska voters rejected the convention by more than a 2-to-1 margin.

The Trump administration’s pick to be the top federal law enforcement officer in Alaska is a veteran financial crimes prosecutor who has worked in the Alaska U.S. Attorney’s Office since 2020.

Michael J. Heyman’s Friday appointment to be Alaska’s U.S. Attorney is pending Senate confirmation, and he will serve on an interim basis for 120 days until then, according to a Justice Department statement Monday.

Heyman has 24 years of legal experience and won the Department of Justice Director’s Award in 2023 for his prosecutorial work, the statement says.

Heyman’s predecessor, S. Lane Tucker, leaves the role in the wake of a scandal involving a federal judge – Joshua Kindred, who resigned in July – and two federal prosecutors with whom he allegedly had secret, inappropriate relationships.

The U.S. Attorney’s Office, under Tucker’s leadership, was under investigation related to one of the prosecutor’s whistleblower complaint, until the Justice Department announced it had reached a settlement with her.

The Monday statement from the U.S. Attorney’s Office did not mention Tucker, and a spokesperson did not immediately respond to questions about her employment.

Leaders in the Alaska House and Senate say they’re deeply concerned about the impacts of federal staff purges and a forthcoming congressional budget reconciliation package that’s expected to extend tax cuts, stiffen immigration policy and vastly scale back federal spending.

In a letter to the state’s congressional delegation, Senate President Gary Stevens, R-Kodiak, and House Speaker Bryce Edgmon, I-Dillingham, say the two Trump administration priorities “endanger the economic prosperity and social well-being of Alaskans.”

“The time to sound the alarm is over. It is time to act,” Edgmon and Stevens wrote. “Please reach across the aisle and restore the checks and balances that our founding fathers envisioned.”

The Alaska Legislature’s two presiding officers say they’re concerned the recent House-passed Republican budget framework, which calls for $4.5 trillion in tax cuts and $2 trillion in spending cuts over 10 years, will leave Congress no choice but to slash programs like Medicaid, the Supplemental Nutrition Assistance Program, Head Start and Bypass Mail.

“Even if half of what’s been proposed happens to Alaska, it is going to reverberate around the state in a way that we haven’t seen in many, many years,” Edgmon told reporters on Friday.

Medicaid is a particular concern for state lawmakers. The budget resolution from the U.S. House — a necessary step to avoid a filibuster in the Senate — charges the congressional committee overseeing Medicaid and Medicare with cutting $880 billion over 10 years.

Even if the committee cuts everything in its purview other than the two programs, it would still be more than $600 billion short of that goal, according to an analysis by the New York Times. Edgmon and Stevens said the plan could lead to the loss of more than $2 billion in federal funding at a time when the state is already facing hundreds of millions of dollars in structural deficits amid faltering oil revenue.

“Absorbing a $2 billion plus reduction in the return of federal funds to our state is not an option,” they wrote. “It is a direct threat to Alaska’s future, plain and simple.”

Stevens and Edgmon also decry the Trump administration’s moves to fire more than 1,000 newly hired or recently promoted federal workers, from fisheries researchers and to forest rangers. Data on exactly which jobs have been lost has been spotty — though union leaders say they expect all of the nearly 1,400 so-called “probationary” federal employees in the state to lose their jobs.

Another leader of the largely Democratic coalition controlling the State House, Rep. Louise Stutes, R-Kodiak, said she’s concerned the firings will put everyday Alaskans in danger, pointing to agencies like the National Oceanic and Atmospheric Administration and its subsidiary, the National Weather Service.

“It’s horrifying for the safety of our fishermen,” she said. “As we all know, that’s one of the most dangerous endeavors or professions that there is, and to reduce the safety factor even more is just unconscionable.”

In their letter, Edgmon and Stevens also say a freeze on millions in planned energy infrastructure spending threatens to derail important projects, including $130 million planned for rural Alaska.

“These modernization projects are life-sustaining in parts of the state where fuel can cost over $20 per gallon,” they wrote.

Some Republican state lawmakers, though, say leaders are overreacting. Senate Minority Leader Mike Shower, R-Wasilla, pointed to statements from congressional leaders promising to avoid sweeping cuts to aid programs. He says for now, it’s all speculation — after all, at this point, Congress hasn’t laid out the specifics.

“First of all, the process is just starting,” he said. “Anybody who says anything about what’s going to happen or how it’s going to take place, or what’s going to be cut, is pure speculation at this point.”

As for the federal firings, Shower said he supports Trump and billionaire Elon Musk’s efforts to shrink the footprint of the federal government. He said he’s optimistic that even if the cuts go too far at first, critical jobs will be filled.

“This is, maybe, the process of ripping the Band-Aid off a little bit, and it’s painful, but we may have to look at rebalancing when it’s over,” he said. “It’s going to be really a painful dip here, as they kind of basically go through with a sledgehammer, and then maybe it’s time to come back in with a scalpel after that and start (saying), ‘OK, now, what do we really need?'”

But to Stutes, that rings hollow. She said she’s worried that even if the jobs come back, the people who filled them won’t.

She said she’s worried the cuts will exacerbate the state’s decade-plus-long struggle with outmigration as young people and families seek greener pastures elsewhere.

“That’s great to say, as these cars are headed down the highway,” Stutes said. “You think it was bad before?”