Legislators hold breath, budget with war-influenced state revenue update expected Friday
- Mark Sabbatini
- 2 hours ago
- 4 min read
House majority pulls supplemental spending bill off floor after minority refuses to tap reserves to fund it; accusations fly about gambling on how Iran war will affect oil prices
By Mark Sabbatini
Juneau Independent
A monumental moment for state leaders is expected Friday with the release of an official forecast of how much extra revenue Alaska’s government may get due to the Iran war.
Oil prices have skyrocketed since the United States and Israel attacked Iran on Feb. 28, which had legislators on Thursday commenting on the grim reality the conflict may mean hundreds of millions of extra dollars for Alaska.
"I understand that we’re all feeling awkward about the unfortunate reason for the optimism, which is that mankind can’t stop itself from fighting,” said Andy Josephson, D-Anchorage, who co-chairs the House Finance Committee.
The day also saw lawmakers pull a $373.5 million supplemental budget off the House floor due to a bitter disagreement about tapping into a reserve fund to pay for it. Dissenters, all members of the Republican minority caucuses, said that decision should be made after the updated revenue forecast.
"I find it really interesting that we're taking up this item the day before we actually know how much money we have and what the size of our deficit is," Rep. Will Stapp, R-Fairbanks, said during floor debate. He said after talking to executive and legislative financial staff "I'm pretty confident that the vast majority of items in this are probably going to be able to be funded in this specific bill through the current (year) surplus."
Members of the bipartisan House majority accused the minority caucus of playing Russian roulette with critical budget items such as transportation projects scheduled this year. The supplemental budget includes $70.2 million needed to secure about $630 million in federal funds for such projects — and public and private transportation leaders have been imploring lawmakers to move quickly on those funds so the window for this year’s work season isn’t missed.
"We're saying, ‘Eh, we like to build, but we want to see what the revenues are later on,’" said Rep. Calvin Schrage, I-Anchorage, another House Finance Committee co-chair. "We're going to continue to wait. We're going to continue to leave people hanging. We're at the verge of being too late. I'm getting texts as of this morning from industry leaders that if we don't deploy this money now we're jeopardizing hundreds of millions of dollars that would hit the road this summer. What are we doing?"
The transportation funds are needed because Gov. Mike Dunleavy vetoed them last year as part of a political fight involving the Cascade Point Ferry Terminal, which his administration favors and allocated tens of millions of dollars toward. Legislators voted to divert $37 million in so-called Juneau access funds to other projects — and questioned his support of the terminal since a state study says it will have negligible benefits for travlers, but benefit a planned gold mine in the area. Dunleavy subsequently issued his veto.
Other significant items in the supplemental budget are $98.7 million for wildfire response and up to $75 million for disaster relief.
Also included is about $130 million to replenish the Alaska Higher Education Investment Fund, which provides scholarships, after lawmakers tapped it last year to cover a deficit in the current year’s budget when the House minority blocked an effort to tap the state’s $3 billion Constitutional Budget Reserve, which is typically used for shortfalls.
The lack of minority support was again key during Thursday’s supplemental budget vote.
The House passed the supplemental budget by a unanimous 40-0 vote, following the Senate's unanimous passage of it Wednesday. But a House vote to fund the budget by tapping the CBR fell short by a 22-18 vote since a three-fourths majority is necessary to access the fund. Rep. Mia Costello, R-Anchorage, was the lone minority crossover to the bipartisan majority coalition vote.
That resulted in the House majority voting to rescind passage of the supplemental budget and pull it from the floor, returning it to the Rules Committee. The House then adjourned until Monday — and House Speaker Bryce Edgmon, I-Dillingham, said it is not a certainty the bill will be brought back to the floor then even if the revenue forecast is known, since there also needs to be assurance the budget can be funded.
The $64 question: What will oil prices average this year and next?
Alaska lawmakers last spring passed a budget that balanced if North Slope oil prices average $64 a barrel for the fiscal year ending June 30. The official revenue forecast at the time was prices would average $68. But a grim revenue forecast in December stated this year’s prices would be $65.48 and next year’s about $62.
Oil was $92 a barrel on Tuesday.
House majority lawmakers said Thursday that if oil prices were to average $90 a barrel between now and June 30 it would mean about $300 million in extra revenue. That means the supplemental budget would still need additional funds — and presumes the war in Iran will last that long and cause sufficient disruption to oil markets in the process.
However, some analysts say oil could go above $100 a barrel. Oil prices at that level for a full year would generate an extra $1.5 billion more for the state compared to the most recent revenue forecast.
• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.
