20-05-2025
Alaska Senate approves austere operating budget with $1,000 PFD ahead of House vote
May 20—JUNEAU — The Alaska Senate on Tuesday approved an austere operating budget for the next fiscal year with a $1,000 Permanent Fund dividend.
Lawmakers this year have grappled with a substantial deficit and a dire fiscal outlook due largely to diminished oil revenue. When adjusted for inflation, the dividend figure set to be approved by the Legislature this year is the lowest since the program began in 1982.
The House is preparing to vote later in the day on the same budget bill.
Legislative leaders said that Tuesday would be the final day of the legislative session, one day before the constitutional deadline for the session to end.
The Senate passed the budget after minimal debate on a 17-3 vote. All 14 members of the bipartisan majority supported the budget. Three members of the Senate Republican minority caucus voted yes — Sens. Mike Cronk, James Kaufman and Rob Yundt — and three minority members voted no: Sens. Mike Shower, Robert Myers and Shelley Hughes.
Bethel Democratic Sen. Lyman Hoffman, who manages the operating budget in the Senate, said the spending plan for the fiscal year that starts July 1 has a roughly $57 million surplus.
But lawmakers have warned that surplus could quickly disappear if oil prices stay below projections. Additionally, legislators have said the state's fiscal outlook will likely be even more dire next year.
The Legislature's budget would make cuts across state agencies. The Alaska Department of Corrections is set to see several reductions, including a $7.5 million cut with the intention of closing a housing unit at Spring Creek Correctional Center.
Additional cuts were approved for the University of Alaska, the Alaska Psychiatric Institute and the Alaska Gasline Development Corp.
The House passed its draft budget in April with limited spending cuts, a $1,400 dividend and a roughly $250 million deficit. The Senate's draft spending plan was balanced with deeper spending reductions proposed and a $1,000 dividend. The lower PFD figure freed up roughly $264 million for other spending.
A conference committee met in the final days of the legislative session to negotiate differences between the House and Senate budgets. That way the same budget bill can pass through both chambers and onto Gov. Mike Dunleavy's desk.
The committee restored some funding that the Senate had cut from its draft budget.
Just under $14 million in state funding was approved for behavioral health programs with Anchorage in the midst of a homelessness crisis. Another $14 million was approved for child care, including $7.7 million in subsidies for the sector, and $5.6 million in additional assistance for families. However, those assistance payments are contingent on a separate child care bill becoming law.
The Senate on Tuesday also approved drawing close to $200 million from the state's main savings account — the $2.8 billion Constitutional Budget Reserve — to balance the budget for the current fiscal year that ends June 30.
To draw from that account requires support from three-quarters of the House and Senate.
The Senate easily cleared that threshold on Tuesday. Eighteen of 20 senators voted to draw from savings to balance the current fiscal year's budget. Only Hughes and Myers voted no.
If that three-quarter vote fails in the House, almost $200 million would be drawn from the state's investment bank, the Alaska Industrial Development and Export Authority, and from a fund that pays college scholarships to bridge the current fiscal year's fiscal shortfall.
Hoffman said the need for extra funding for the current fiscal year was partly due to a drop in oil prices. He said that virtually all of the appropriation requests in the supplemental budget came from the Dunleavy administration.
Shower, the Senate minority leader, said before the vote that lawmakers had already approved the appropriations being considered last year. He spoke in support of the savings draw and said, "This is just one of those things that we have to do."
This is a developing story. Check back for updates.
