House and Senate face deadline of 11:59 p.m. Wednesday to pass spending plan, which currently has a $40 million surplus if oil averages $75 a barrel

By Mark Sabbatini

Juneau Independent

A state budget with a $1,000 Permanent Fund Dividend plus a $200 energy relief payment, along with a $144 million boost in education funding, was approved by a joint House-Senate committee Sunday, clearing the way for final votes in both chambers before the Alaska Legislature’s scheduled adjournment Wednesday.

The roughly $13 billion budget has an estimated $40 million surplus, said Sen. Lyman Hoffman, D-Bethel, co-chair of the Senate Finance Committee. That means a majority vote in both the House and Senate will be sufficient for passage, whereas a budget with a deficit that taps the Constitutional Budget Reserve fund requires a three-quarters vote in each chamber.

The surplus is based on oil prices averaging $75 a barrel during the fiscal year that starts July 1, Hoffman said.

"I would say that we are going to see a substantially higher number as the year goes on," he said.

Lawmakers began the session in January with a revenue forecast of about $62 a barrel, prompting early talk of significant budget cuts including a greatly reduced PFD. However, the price of ANS West Coast oil on Thursday was about $116 a barrel as prices have skyrocketed since the Iran war began Feb. 28. Analysts have stated prices are likely to remain elevated for some time after the war ends due to infrastructure damage and other lingering impacts.

Higher oil prices allowed the inclusion of the $200 energy relief payment to supplement a PFD that’s the same amount as last year’s — which was the lowest ever when adjusted for inflation. Hoffman said a higher dividend or energy payment was practical given the slim surplus in the plan approved Sunday.

"We can't spend any money that we don't have," he said, noting a deficit resulting from a higher dividend would mean triggering the three-fourths vote requirement to tap reserves.

Gov. Mike Dunleavy’s budget submitted last December contained a so-called "statutory" PFD of about $3,650 and a $1.5 billion deficit that would have drained more than half of the budget reserve fund. The House passed a budget with a PFD of $1,500 and the Senate trimmed that to $1,000, with the final $1,200 payout negotiated by the joint conference committee of six legislators.

The total cost to the state of a $1,000 PDF is estimated at $674 million, while a $1,500 PFD is estimated at $992 million and a $3,650 dividend $2.4 billion.

Higher oil prices also allowed about $29 million in energy relief funding for school districts in addition to $115 million already allocated. How that money is spent is still being debated by legislators in different bills that could either boost per-student funding or restructure the method by which districts are given state funds.

The conference committee also resolved more than 200 other line-item differences between the House and Senate budgets, dealing with both specific spending amounts and intent language of how money is spent, in most cases picking one chamber’s version or the other.

The budget passed by the Legislature will be subject to line-item vetoes by Dunleavy, which can be overridden by a three-quarters vote of legislators. Such a vote occurred last year when the House and Senate restored a $200 per-student increase in state education funding.

• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.