The House passed the FY24 operating budget (HB 39) and the mental health budget (HB 40) last week. Our top priorities in the House Minority Coalition have been increasing the Base Student Allocation (BSA) to fund public education and enacting defined benefits for all public employees.
In order to fund these priorities, we need a fiscal plan with new revenues to provide long-term budget stability for the state.
I voted with my caucus against this operating budget because it inadequately invests in Alaska and dangerously uses our savings to fund a one-time increase in education funding. The budget which passed the House still has a deficit of $584 million. I want to be clear: the budget debate is not over. This vote is one step in the broader negotiations to fund our government in a timely manner and prevent a government shutdown. Below is additional information for how we got here.
Fiscal Situation and Budget Background
Here's how the operating budget changed before the budget hit the floor.
December 15, 2022: The governor's original FY24 budget of $7.3 billion flat-funded government services with a statutory $3,860 PFD. For this budget, the Department of Revenue had projected oil prices at $88 per barrel in FY24.
February 15, 2023: With declining oil prices, the governor released his amended operating budget - keeping a statutory PFD with a projected deficit of $400 million in FY24.
March 20, 2023: In anticipation of lower revenues, the House Finance Committee Substitute changed the statutory PFD in the governor's amended budget to a "50-50" split of the Percent of Market Value (POMV), resulting in a $2,700 PFD. With amendments added in the House budget process, the FY24 operating budget still had a deficit of about $400 million.
March 21, 2023: The Department of Revenue's Spring 2023 Revenue forecast estimated oil prices at about $73 per barrel for FY24. (Under the Spring 2023 revenue forecast, the budget deficit with a statutory PFD would have been approximately $890 million - $920 million.)
House Floor Budget Debate
For over a decade, due to declining oil revenues, the Alaska Legislature has relied on using its savings to address budget deficits by drawing from the Constitutional Budget Reserve (CBR). The CBR has now dwindled to $2 billion - an amount that would risk our state's ability to respond to emergencies like natural disasters or a pandemic.
Our caucus introduced nearly 30 amendments to invest in critical state services and pushing for new revenue - all but one of our amendments failed to pass the house. However, the most contentious period of the budget debate centered on a one-time increase to education funding. Ultimately, I voted with my colleagues against this amendment because the House Majority unexpectedly changed the fund source to draw from our savings.
Initially, on the first day of budget deliberations, we voted 39-1 to fund a one-time increase to education funding of approximately $175 million, enough to increase education funding by $860 per student. Two days after this amendment, the House Majority rescinded action on the education amendment and presented an amendment that would have tied the education funding increase directly to the Constitutional Budget Reserve (CBR) instead of the operation budget.
Our caucus temporarily left in protest because of this bait-and switch tactic to pit increased education funding against long-term budget instability. Although we are committed to education funding, tying the CBR to new education funding is a bad idea. I want our schools to have sustainable, long-term funding that doesn't risk our state's fiscal situation. That is why I am committed to a fiscal plan that includes new revenues.
Here are the highlights from my speech on the vote on this budget:
- "Flat-funding government does not mean investing in Alaska."
- "Drawing from our savings without new revenues means we will see shrinking PFDs in the future. We need a fiscal plan now, so that we don't continue to draw on our savings next year and next year."
- "This vote is the first step of our budget impasse."
Our state is in a crisis of outmigration and inadequately funded state services.
I simply can't stand for trying to balance our budget in a way where we are drawing from our savings as a first step. We can do better. We can provide reliable, long-term education funding by increasing the BSA with a fiscal plan and new revenues. As the budget is now being debated in the Senate, I will continue to push for new revenue proposals and prioritize a fiscal plan.