By SHANNON HAUGLAND
Sentinel Staff Writer
The Alaska state budget debate likely will come down to a question of higher Permanent Fund dividends versus more funds for education, Sitka’s senator says.
“We’re debating whether we’re going to teach our kids reading, writing, arithmetic or we’re going to teach them to cash a check,” Bert Stedman said in an interview today.
Stedman, co-chair of the Senate Finance Committee, was addressing the most recent House majority proposal for a “50-50” dividend. The equal split between the dividend and other government expenses – including education – would give Alaskans a $2,800 dividend at a cost of $1.8 billion, he said.
The Senate currently is waiting for the House version of the fiscal year budget.
“The House budget is under water by $600 million,” Stedman said, which would require a draw-down of that amount from the constitutional budget reserve.
He said the Senate’s biggest challenge at this point is “trying to make ends meet,” taking into consideration revenues, and the balance between education, the dividend, the capital budget and other government operations.
The House budget includes a one-time $175 million increase to schools, but no increase in the base student allocation. Senators have indicated they will support a BSA increase, which is a more permanent increase.
Stedman said his main objection to the House version is the draw-down in savings.
“In other words the Senate is going to be striving not to have a $600 million deficit budget,” he said. “We will produce a balanced budget. Something’s got to give because cash is not coming in the door.”
The Legislature received the governor’s version of the FY24 budget in December. The Senate presents its version of the budget after receiving the House budget.
“We need to deal with the BSA (base student allocation) and increase that,” Stedman he said, citing the effects of inflation and other costs on school budgets throughout Alaska. “We’ll be meeting with the governor today to see what his comfort level is.”
The state currently is helped by a slight increase in the price of oil which adds to the figure on the revenue side of the FY24 budget, but Stedman said that could disappear and go the other direction just as quickly by the start of the year July 1.
Stedman said he doesn’t know exactly what direction the Senate as a whole will take, but he hopes all legislators can keep in mind the need to keep savings at a reasonable level to buffer any changes.
“We’re down to a low amount in the CBR (constitutional budget reserve) and we need to be cognizant of that,” he said. “We need to be able to handle a downward spike in oil prices, at least for a short time anyway. We’ve got the money but the available amount is down to a perilously low position.”
That amount is $2.2 billion, which is below the $3.5 billion recommended by Legislative Finance, the nonpartisan division of the state which provides fiscal analysis to the Legislature.
Drawing down the CBR, as proposed by the House, requires a three-fourths vote in favor by both House and Senate.
“There is a need to move to increase the BSA but we need to do it in recognition of other demands, namely the dividend,” Stedman said. “It’s a discussion between the dividend size and education.”
Stedman said he’s expecting the House to finalize its budget soon, “if they want to make it home before summer.”
He said many in the Senate favor a 75-25 split between the dividend and the rest of the budget, which would mean a $1,400 per person Permanent Fund dividend. That would end up costing $800 million compared to the $1.8 billion in the House majority’s plan.
“Then we could address the needs of education,” Stedman said. He added that not only could education then be addressed, but the state would set itself up better longer-term financial health.
“What are we going to do next year?” he said. “We need to be cognizant of that. A couple of us are looking out a couple years and not just to this May. We have to balance the budget a year from now too.”
