Budget Overview

Gov. Mike Dunleavy’s proposed FY 2025 budget was introduced Dec. 14 and totals $13.9 billion with a deficit of just under $1 billion. Governor Dunleavy is proposing a Permanent Fund Dividend of $3,400 per resident at a cost of approximately $2.39 billion. This is the largest single expenditure in the operating budget. Additionally, several factors will likely create additional budget pressure in FY25, including increased employee salaries (the largest union, GGU, is set for a 5% increase in FY25), retirement payments (set to increase by $68.1 million in FY25), and increasing healthcare and education costs. All the FY25 budget documents can be found at the OMB webpage HERE. To afford the full PFD, Governor Dunleavy proposes to fund the deficit out of the Constitutional Budget Reserve (CBR). The CBR has an estimated $2.7 billion in it. Many legislators immediately pushed back on filling the proposed deficit by using the state’s savings account. The budget proposes no increases to spending on K-12 education despite an ongoing budget crisis. Dunleavy said in a news conference that the budget proposal is just a starting point and is likely to change after lawmakers weigh in. The per-student funding formula known as the Base Student Allocation has not increased in over eight years, despite record inflation, contributing to school district budget shortfalls. There is a reduction in the K-12 formula but that is due to student count reductions. Combining these two factors results in a $119.5 million dollar reduction in school funding. There are no proposed budget changes or increased staffing to key permitting agencies across multiple departments. Community assistance, municipal harbor debt, revenue sharing, PCE, school bond debt reimbursement, and PERS/TRS obligations are all funded in the budget.

The Department of Revenue also released its fall forecast. In comparison to the March 2023 Revenue Forecast, the ANS oil price forecast increased by $9.39 per barrel for FY 2024 and $6.00 per barrel for FY 2025. These forecasted changes result in projected increased revenue of $228 million for FY 2024 and $79 million for FY 2025. More details can be found in the Fall 2023 Revenue Sources book. Although any increase in revenue is good news, oil price forecasting is difficult to predict and subject to many variables, including global politics.

Operating Budget Highlights

Education:

• Foundation Program/BSA: $1.16 billion.

• Pupil Transportation: $70.5 million.

• School Debt Reimbursement: $57.5 million.

• REAA and Small Municipal School District Funding: $27 million.

• Grant to Alaska Resource Education/Resource Education: $1 million.

• Grant for Hunter Education/Archery/Gun Safety: $1 million.

• Child Nutrition: $77.2 million.

• Alyeska Reading Academy and Institute: $5 million.

• Teacher Recruitment, Retention, Certification and Apprenticeship Development: $1.5 million. • Career and Technical Education Initiative: $1.5 million.

• Residential School Funding: $8 million.

• Broadband Grants: $6 million.

• Pre-K Grants: $6.1 million.

• Arts Council: $3.9 million.

• OWL: $482,000.

• Libraries: $11.8 million.

• University increased costs: $13 million.

• University working groups/Alaska Center for Energy and Power (carbon capture, energy education and hydrogen): $200,000.

Public Safety:

• Village Public Safety Officers, salary increases of 7% and ten new positions: $24.3 million. • Three new Alaska State Trooper investigators based in Bethel to focus on crimes against children in Y-K.

• Four investigators at AST fully dedicated to investigating missing and murdered Indigenous persons.

• New Positions:

• Recruitment Manager to fill vacancies and pay for travel for required testing: $250,000. • Two pilots, Fairbanks and Nome, to improve response times: $400,000.

• Planner for drone operations: $150,000.

• New position to process public records: $140,000.

• Advertising Campaign/Report Missing People Immediately: $250,000.

• Acquisition of a single engine turbine-powered all-weather aircraft for statewide Public Safety operations and replacement of a patrol vessel for Southeast Alaska (Cap budget).

Corrections:

• Community Jails: $10 million.

• Increasing costs/Pretrial: $10 million.

Natural Resources:

• New Position for Carbon Offset Program: $175,000.

Community:

• Senior Benefits Program/Monthly Cash Benefits to Seniors: Not funded, usually $21 million. • Community Assistance/Revenue Sharing: $30 million.

• Food Banks/Food Security: $5 million to food banks.

• 30 full-time Eligibility Technician positions to process back logged SNAP applications: $8.8 million.

• Debt repayment including harbors: $3.5 million.

• Commerce/Broadband: Expedite projects by funding permitting and land management jobs at other agencies like the Departments of Natural Resources, Transportation and Fish and Game: $1.1 million.

As in past years, the capital budget mostly provides state matching funds for federal projects. There are very few district specific projects. The total budget is $3.54 billion of which $2.99 billion is federal funds.

Capital Items

Some highlights include:

• School construction and maintenance, $8 million funding for the first project on each list. • Broadband Equity Access: $1 billion.

• University Early Childhood Day Care Center: $5.6 million (Fairbanks).

• University/Drones: $10 million.

• University/Carbon Capture: $11.1 million (Railbelt).

• Alaska Marine Highway M/V Tustumena Replacement Vessel: $92.7 million. • Food Security/Micro-Grants: $4 million.

• NPRA Grants: $46.9 million.

• Community Block Grants: $6.3 million.

• Alaska Travel Industry: $2.5 million.

• AEA-Renewable Energy Grants/Round 16: $5 million.

• AEA-Solar for All: $20 million.

• AEA-Bulk Fuel Upgrades: $13 million.

• AEA-Rural Power Systems Upgrades: $27.5 million.

• AEA-Statewide Grid Resiliency: $13.9 million.

• Village Safe Water Upgrades and Expansions: $106 million (increase).

• Village Safe Water First Time Projects: $159.1 million (increase).

• DEC: Million in increased funding for the Clean Water and Drinking Water funds, for the revolving loan fund and new funding for emerging containments.

• Pacific Coastal Salmon Recovery Fund: $6.8 million.

• Pacific Salmon Treaty Chinook Fishery Mitigation: $750,000.

• Alaska Marine Salmon Fisheries: $1.3 million.

• Code Blue: $500,000.

• Statewide deferred maintenance and repair: $28.2 million.

• National Recreational Trails Grants: $1.75 million.

• Winter Trail Grants: $185,000.

• State Parks Facilities Upgrades: $3 million.

• Public Access Infrastructure: $1 million.

• Community Wildfire grants: $10 million.

• Mine Reclamation: $4.3 million.

• AHFC Teacher, Health, and Public Safety Housing: $9.5 million (increase). • AHFC Energy Programs, Weatherization: $17.5 million (big increase).

• AHFC Down Payment Program: $25 million (new).

• AHFC Affordable Housing Development/Seniors: $3 million.

• Rural Housing Coordinator-NWAB (MH): $135,000 and one rural $135,000. • Statehood Defense: $2 million increase to Dept. of Law

• Rural Airports: $384.7 million.

• PFAS: $2.5 million for 25 State-owned Part 139 airports to switch to non-PFAS foams. • AGDC: $4.5 million to advance commercial investment in AKLNG and maintain project assets in ready status.

• Tax Revenue Management System (TRMS): $1 million for maintenance and support. • No funding for the AIDEA/DNR/Mustang Road transfer or the large railbelt transmission line project.

• Millions in funding for highways, roads and airports with the required state match included.

Senate Organization

The Alaska State Senate bipartisan majority coalition consists of 17 members, eight Republican and nine Democrats. Members include Sens. Click Bishop (R-Fairbanks), Jesse Bjorkman (R-Kenai), Matt Claman (D-Anchorage), Forrest Dunbar (D-Anchorage), Cathy Giessel (R-Anchorage), Elvi Gray-Jackson (D-Anchorage), Lyman Hoffman (D-Bethel), James Kaufman (R-Anchorage), Scott Kawasaki (D-Fairbanks), Jesse Kiehl (D-Juneau), Kelly Merrick (R-Eagle River), Donny Olson (D-Golovin), Bert Stedman (R-Sitka), Gary Stevens (R-Kodiak), Löki Gale Tobin (D-Anchorage), Bill Wielechowski (D-Anchorage), David Wilson (R-Wasilla).

Senate leadership are as follows:

Senate President – Sen. Gary Stevens (R-Kodiak)
Rules Chair – Sen. Bill Wielechowski (D-Anchorage)
Majority Leader – Sen. Cathy Giessel (R-Anchorage)
Majority Whip – Sen. Click Bishop (R-Fairbanks)
Finance Co-Chairs: Sen. Bert Stedman (R-Sitka), Operating Budget Sen. Lyman Hoffman (D-Bethel), Capital Budget Sen. Donny Olson (D-Golovin), Bills
Legislative Council Chair – Sen. Elvi Gray-Jackson (D-Anchorage)
Education Chair – Sen. Löki Gale Tobin (D-Anchorage)
Health & Social Services Chair – Sen. David Wilson (R-Wasilla) and Vice-Chair Sen.-elect James Kaufman (R-Anchorage)
Judiciary Chair – Sen. Matt Claman (D-Anchorage)
Resources co-Chairs – Sen. Click Bishop (R-Fairbanks); Sen. Cathy Giessel (R-Anchorage)
State Affairs Chair – Sen. Scott Kawasaki (D-Fairbanks)
Community & Regional Affairs Chair – Sen. Forrest Dunbar (D-Anchorage)
Labor & Commerce Chair – Sen. Jesse Bjorkman (R-Kenai)
Transportation Chair – Sen. Bill Wielechowski (D-Anchorage)
World Trade Chair – Sen. Lyman Hoffman (D-Bethel)
Joint Armed Services co-Chair – Scott Kawasaki (D-Fairbanks)
Legislative Budget & Audit Vice Chair – Bert Stedman (R-Sitka).

Conclusion

This is just the beginning of the budget process. At this point, the proposed budget is mostly flat funded and not particularly exciting. Many senators noted that both the capital and operating budgets failed to address a number of items that will need to be considered. Additionally, the education community will be advocating strongly for increased funding after years of rising inflation and no permanent increase to base funding. Also note, federal grant funds will continue to flow to Alaska over the course of several years and will cover several budget cycles. New grant programs are still being implemented at both the state and federal level and will provide additional opportunities to fund projects