Legislature Passes Budget
The legislature passed a compromise budget, ensuring adequate funding for constitutionally mandated services, protecting billions in the Permanent Fund’s corpus, and providing critical relief to local communities and small businesses affected by the COVID-19 pandemic. The budget passed this week maintains a six-year trend of flat spending.
Operating Budget
House Bill 69 authorizes $4.5 billion in Unrestricted General Funds (UGF) for FY2022 operating expenses.
For the second year in a row, legislators voted to transfer $4 billion from the Permanent Fund’s Earnings Reserve Account (ERA) to the fund’s constitutionally-protected principal.
Below are some highlights:
Education
- Pre-K – $2.5 million for Pre-Kindergarten grants
Public Safety
- State Troopers – $158 million
- Alaska Wing Civil Air Patrol – $250,000
- Council on Domestic Violence & Sexual Assault – $24.7 million
Law
- Criminal Division – $40 million
Health and Social Services
- Pioneer Homes – $106.9 million
- Medicaid Services – $2.3 billion ($1.8 billion federal)
- Alaska Psychiatric Institute – $39.3 million
Judiciary
- Added $1 million for courts to keep up with the additional workload created by more prosecutors and defenders
- Therapeutic Courts – $3.25 million
Transportation
- Alaska Marine Highway System – $15 million
University of Alaska
- $15.7 million in lost revenue relief, and $10 million for receipt authority.
For more information, view the Conference Committee motion sheets.
Reverse Sweep
Funding for student scholarships, construction projects, and half the Permanent Fund dividend draws from the Constitutional Budget Reserve Fund (CBR) and the “reverse sweep,” which requires a supermajority three-quarter vote from the House and Senate. The three-quarter vote needed for the CBR draw also returns general funds automatically “swept” into the CBR at the end of the fiscal year to their respective general fund sub-funds with specific, statutory purposes. For example, the “reverse sweep” restores funds for the Power Cost Equalization Endowment Fund. All 21 members of the House Majority and 3 members of the House Minority voted for the reverse sweep and the CBR draw, but these 24 votes were not enough to reach the 30 votes needed for approval. The Senate also did not reach the 15-vote threshold.
With neither body able to achieve that threshold, half the funding for Permanent Fund dividends ($739 million) is inaccessible, reducing the $1,100 dividend to $525.
Other programs that received no funding include:
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Power Cost Equalization Endowment Fund (PCE) – $12.4 million. Roughly 85,000 Alaskans that depend on the Power Cost Equalization program will likely see their energy costs increase as early as July
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Community Assistance – $17.6 million
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The Alaska Performance Scholarships – $11.75 million
- Infrastructure Projects
The $1,100 PFD represents a compromise between the two bodies and among divided members. Lawmakers, however, are continuing to negotiate toward an agreement that will achieve the supermajority vote that is necessary to fund scholarships awarded to our best and brightest students, summer construction projects to improve the quality and safety of the road system, the largest Permanent Fund dividend we can afford, and an array of other programs and services essential to Alaskans. With dividends traditionally paid out in October, lawmakers still have time to reconvene and reach a compromise.
Effective Date Clause
The budget also includes an effective date provision making the budget effective on June 30, 2021, the end of the current fiscal year. The effective date clause requires passage by a 2/3 majority. Even when there are enough votes to pass the budget, but not enough to approve the effective date clause, it has long been recognized—based on advice from the attorney general and attorneys for the legislature—that the budget can take effect with the new fiscal year. This year, all 21 members of the House Majority and 2 members of the House Minority voted to approve the effective date clause, but opposition from the House Minority caused the effective date to fail. As they have advised in the past, attorneys for the legislature advised that “funds may be obligated and expended prior to the actual effective date....”
Despite prior opinions of the attorney general from as early as 1979, the governor announced on Thursday that the budget is “defective” because the effective date clause did not pass. The governor also issued lay-off notices to numerous state workers at the same time.
Stay tuned as we continue efforts to work with the House Minority to approve the effective date clause.
