Budget Deal Reached; State Operating Budget Passes the Alaska Legislature
FY 2019 Budget Funds a $1,600 PFD and Includes More Money for Public Safety
By MARY KAUFFMAN
May 14, 2018
The operating budget, HB 286, excludes the bulk of FY 2019 education funding of $1.28 billion which is covered in a different bill, HB 287. HB 287 delivers up to two years of funding for K-12 education and was signed into law by the Governor on May 3, 2018.
With the addition of forward-funding education, the FY 2019 operating budget appropriates roughly $4.4 billion in UGF [unrestricted general fund], which is legislators support the budget say is a $1 billion cut from FY 2015.
In addition, the budget includes $1 billion to pay each eligible Alaskan a $1,600 Permanent Fund dividend.
The compromise budget agreement between the Alaska House of Representatives and the Alaska State Senate resulted in the passage of the fiscal year 2019 operating budget for the State of Alaska. Saturday’s budget deal prevents any disruption in essential public services as the State of Alaska enters the busy summer tourism and fishing seasons. House Bill 286 features total General Fund spending of $6.27 billion.
The budget includes Alaska House Majority Coalition priorities such as $942 million to inflation-proof the value of the $65 billion Alaska Permanent Fund, $1.02 billion to pay for $1,600 Permanent Fund Dividends for each eligible Alaskan, a $10 million investment in the University of Alaska above the Governor’s proposal, and multiple measures to improve public safety and law enforcement in Alaska.
“This budget is the culmination of a lot of hard work and compromises on all sides. Our Coalition fought hard for a larger Permanent Fund Dividend because we know how vital PFDs are to Alaskans. The continued long-term health of the Permanent Fund, and in turn the PFD, is a key priority for our coalition, so we stood strong in demanding that the fund be inflation-proofed for the first time in three years,” said Speaker of the House Rep. Bryce Edgmon (D-Dillingham).
Edgmon said, “Throughout the public process to develop this budget, the people of Alaska were loud and clear that public safety is a major priority. Our Coalition worked to ensure no cuts to State Troopers, and we insisted on funding for more prosecutors and public defenders as part of the budget compromise.”
The FY 19 state operating budget incorporates the rules-based Percent of Market Value (POMV) approach that lawmakers approved earlier this week to access the earnings of the $65 billion Alaska Permanent Fund to pay for essential public services and PFDs. The 5.25 percent draw totals $2.7 billion. $1.69 billion will be used to help pay for public services like public education, State Troopers, fish and game management, and road maintenance. $1.02 billion will be used to fund $1,600 PFDs this fall.
“Developing a responsible budget during a fiscal crisis is no easy task. We partially did that with the budget bills that passed today. I take comfort in knowing that by passing a budget in a timely manner the State of Alaska can deliver the essential public services that keep our state running. Further action will be needed to ensure sustainable income for our public services. I represent an area heavily dependent on the tourism and commercial fishing industries, and this budget allows those industries to go forward without interruption,” said House Finance Committee Co-Chair Rep. Paul Seaton (R-Homer), who served as the lead negotiator for the House on the HB 286 Conference Committee.
Alaska Senate Democratic Leader Berta Gardner (D-Anchorage) said in a prepared statement, "No budget is perfect, but this one contains many valuable and important items, especially given our fiscal constraints. In the spirit of cooperation, I applaud the efforts of the Finance co-chairs and am pleased we could reach a compromise to get the people's work done."
Senator Gardner said, ""Unfortunately, there is still work left to be done to balance our budget, recover Alaska's economy, and protect Alaskans' PFDs for future generations to come. Alaska is still in need of a comprehensive and sustainable fiscal plan, and I hope next year that will be the Legislature's focus."
"I appreciate the House Majority Coalition and their efforts to early fund education, continuing access to pre-k education, and inflation-proofing the Permanent Fund for the first time in three years. I want to also thank the co-chairs of Senate Finance for providing an open door and including the Senate Democrats in the process to achieve a budget compromise," said Gardner.
“The Legislature came together this year, provided Alaska with fiscal stability and protected the Permanent Fund,” said Sen. Lyman Hoffman (D-Bethel), co-chair of the Senate Finance Committee. “Passage of this budget is a significant moment in Alaska’s history when, for the first time, we are utilizing the Permanent Fund for one of its original purposes: to pay for state services when oil revenue is not enough.”
To cover a portion of the gap, the budget draws a limited and sustainable amount of money from the earnings of the Permanent Fund based on an endowment model approach. The Legislature this year passed the structure necessary to limit the amount of money lawmakers can spend from the Permanent Fund’s earnings.
The bill adopts an endowment management approach that limits the amount of money legislators may withdraw each year from the Permanent Fund Earnings Reserve Account and keeps the original dividend formula intact. A structured annual draw will give the Alaska Permanent Fund Corporation the stability it needs to make prudent investment decisions necessary to grow the fund and maintain a healthy dividend program.
Specifically, the bill:
“The Legislature prioritized the state’s constitutional obligations in this budget,” said Sen. Anna MacKinnon (R-Eagle River), co-chair of the Senate Finance Committee. “There’s still much work to be done. The Legislature must continue to pursue legislative reforms to reduce the size of government and fix the structures and programs that aren’t providing the maximum return for Alaskans.”
The budget draws $600 million from the Constitutional Budget Reserve (CBR); the CBR vote passed the Senate 17 to 2 and the House 32 to 8.
“A lot of thought and hard work went into this budget,” said Senate President Pete Kelly (R-Fairbanks). “I am grateful for the work of my colleagues as well as the patience of Alaskans throughout this process.”
Saturday, the Alaska House of Representatives approved the budget compromise by a vote of 21-19. The Alaska State Senate passed the compromise by a vote of 15-4.
The Fiscal Year 2019 Operating and Mental Health Budgets are on their way to Alaska Governor Bill Walker for his consideration and signature. If signed by the Governor, the Fiscal Year 2019 Operating and Mental Health Budget bills become law.
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