Capitol Report May 2025

Capitol Report

May 2025

Senator Gary Stevens

Alaska State Legislature – District C

Contact: Sen.Gary.Stevens@akleg.gov 1-907-465-4925 Toll Free: 1-800-821-4925

Hello from Juneau,

The legislative session has ended a day early after a compromise between Senate and House members on the operating and capital budgets. This balanced budget is based on a spring revenue forecast of $68 per barrel of oil in FY26. While facing a substantial deficit due to declining oil prices, our budget still includes funding for vital state services including a modest increase to education, public safety, and health care; capital projects including schools, airports and AMHS; and provides for a $1000 PFD.

The budget is now headed to the Governor where he can reduce or veto any line items. You can review the operating and capital budgets here: legfin.akleg.gov.

With the report in the Alaska press my secret / non-secret is out. I will not be running for re-election in 2026. Aside from the fact that some may be quite pleased to learn that I do want to thank you for your support over the past quarter century.

I have tried my best to support all my constituents over the years whether you voted for me or not. I appreciate the great honor it has been. I’m not quiet done yet and will preside as Senate President over the 2026 session where I have had the pleasure of leading a bi-partisan Senate Majority for an unprecedented 8 years (2009-2014 and 2023-2026).

It is my pleasure to endorse Representative Louise Stutes who will be running for the Senate after my term is up. She has enormous experience in the House Leadership as Speaker and Rules Chair. Louise has been a colleague and friend for many years and will well represent our district as she moves to the Senate.

Again, thank you for your support, understanding, and patience with me over the past 25 soon to be 26 years.

Warm regards,

Gary

Education Funding

I joined a bipartisan group of legislators to override the Governor’s veto of HB 57 Base Student Allocation (BSA) Increase of education funding in a joint session, by 46 yeas to 14 nays. Increasing the BSA improves every form of public education in Alaska, including correspondence programs, which serve Alaska’s growing homeschool student population. The bill also incorporates policy initiatives to support Alaska’s charter schools, directs districts to create policies for cellphone use, and establishes an Education Task Force to analyze the state of public education funding and the current accountability provisions for schools. Though the $700 BSA increase is now law, the Governor could still reduce funding for education through a line-item veto in the operating budget. Should that happen, the legislature would need 45 votes to override a budget veto. I do not anticipate a vote on this until January.

HB 57 also provides $22 million for Alaska Reading Act grants and $10 million in career and technical education funding that only becomes effective if Senate Bill 113 is enacted. SB 113 E-Digital Business Corporate Income Tax, also passed both bodies. Once transmitted to the Governor, he will have twenty days, excluding Sundays, to either veto, sign the bill, or let it become law without his signature. I believe there is a strong possibility that the Governor will veto this bill. The legislature would need 45 votes to override a veto because it is a revenue raising bill.

Budgets

FY26 Operating Budget

The Senate and House passed the Fiscal Year 2026 (FY26) operating budget totaling $5.8 billion Unrestricted General Funds (UGF). Faced with a drastic revenue loss from declining oil revenue, many hard decisions were made for spending cuts. For perspective: this budget is $1.7 billion less than the budget proposed by the Governor back in December. Both bodies worked diligently to find a balance while providing for essential services like AMHS, public safety, fisheries management and ensuring the PFD for future years.

The budget does provide a $56 million surplus as a buffer for next year when we expect the deficit to be between $300 to $600 million due to declining oil prices, state employee salary increases, and unknown federal funding cuts. As well, to help balance the FY26 budget, the legislature voted to use some one-time funding sources which will not be available next year.

Here are some items in the budget that District C constituents have commented on:

$450,000 UGF Guardian ad Litem and Public Guardian Child in Need of Aid cases
$5.5 million for child advocacy centers that aid victims of sexual and physical abuse
$150,000 UGF for groundfish management and $400,000 UGF increase for statewide surveys
$7.7 million for child care grants
Added 15 full time positions to process public assistance applications
$2.5 million UGF to support senior centers
$5.7 million for infant learning programs
$1 million for state trooper overtime and $1.7 million for 5 new Village Public Safety Officers including additional housing and support
$5.25 million UGF for DOT maintenance and operations and equipment replacement statewide
$375,000 UGF for rural airport maintenance
$5 million in backstop funding for AMHS if federal revenues fall short of estimates
Increased University facility maintenance by $2 million
Community Assistance: removed $6.7 million, which reduces the FY26 distribution to $23.3 million. This reduction will impact larger communities more than smaller, rural communities.
School Bond Debt Reimbursement: reduced by $11 million UGF (a 25% reduction).
School Major Maintenance: directs the use of unspent, lapsing, UGF at the end of FY25 towards school major maintenance projects.

FY25 Supplemental Budget

The operating and capital budgets also included $200 million for current year (FY25) supplemental items including fire suppression, disaster funding, Alaska Seafood Marketing Institute (ASMI), AMHS maintenance and overhaul on vessels and at terminals, Medicaid shortfall, and the VPSO program. The Senate voted to use our Constitutional Budget Reserve (CBR) savings account to cover these items, but that vote failed in the House. Instead, the supplemental items will now be paid using $100 million from the unrestricted balance of the Alaska Industrial Development and Export Authority (AIDEA) and the remaining coming from the Higher Education Investment Fund (HEIF). It is our intention that the money borrowed from HEIF would be paid back early in 2026.

FY26 Capital Budget

The Senate and House passed a FY26 Capital budget that totals $161 million UGF. Much of these funds are used as matching for over $2.38 billion in federal funding for our state. This is almost a 50% reduction from the Governor’s proposed budget. Unfortunately, there will be no funds available this year for community projects through the state CAPSIS grant program.

The capital budget includes over $1 billion for transportation and infrastructure projects, more than $500 million for water and sewer improvements in rural communities and prioritizes funding for deferred maintenance backlogs at our schools, university, courts and public facilities, including $38 million for School Major Maintenance projects.

Here are some projects in the capital budget that are important for District C:

DOT: Chenega - AMHS Ferry Terminal Reconstruction $328,000 Federal
DOT: Cordova – Replace Rotary Plow $855,000 Federal
DOT: Cordova - Second Street Reconstruction $727,760 Federal
DOT: Cordova - AMHS Ferry Terminal Rehabilitation $168,000 Federal
DOT Homer - Kachemak Bay Drive Milepost 0-3.5 Reconstruction $600,000 Federal
DOT: Homer – Airport Master Plan Update $712,500 Federal
DOT: Homer - All Ages and Abilities Pedestrian Pathway $208,800 Federal
DOT: Homer - Sterling Hwy Milepost 157-169 Final Construction Stage 3 $44.4 million Federal
DCCED: Dixon Diversion - Bradley Lake Hydro Power $6 million UGF state (reduced from $6.5 million)
DOT: Karluk - Surface/Dust Maintenance $1.235 million Federal
DOT: Karluk – Replace Grader $437,000 Federal
DOT: Kodiak - Chiniak Hwy. Milepost 15-31 Rehabilitation Design / ROW Stage 1 $20.104 million Federal
DOT: Kodiak - Rezanof Drive Resurfacing: West Marine Way to Airport $16.583 million Federal
DOT: Kodiak - Sargent Creek Bridge Replacement $513,980 Federal
DMVA: Kodiak - Armory Barracks Conversion $300,000 Other (AIDEA reserves) and $300,000 Federal
DOT: Kodiak - Airport Drainage and Ramp Repave $25.939 million Federal
DOT: Kodiak - Rezanof Drive ADA Improvements $3.047 million Federal
DOT: Ouzinkie - Grader $437,000 Federal
DOT: Seward – Snow Removal and Sand Storage Building $5.414 million Federal
DOT: Seward - Airport Improvements $10.459 million Federal
DOT: Tatitlek - AMHS Ferry Terminal Rehabilitation $328,000 Federal

Legislation that Passed both the Senate & House

HB 65 Railroad Corp Financing

This bill has been signed by the Governor.

Authorizes the Alaska Railroad Corporation (ARRC) to issue a total of $135 million in revenue bonds for the replacement and expansion of the passenger dock and terminal facility in Seward. ARRC is partnering with Royal Caribbean Group to finance the new facility through a 30-year commitment from Royal Caribbean as the dock’s anchor tenant. The bonds will be covered by revenue generated from the dock operations. No state dollars will be used for repayment.

HB 31 Vessels: Registration; Derelict Fund

This Seafood Task Force bill is awaiting transfer to the Governor for his signature.

Exempts commercial fishing vessels that are U.S. Coast Guard documented from the duplicative requirement of registering with the DMV.

HB 116 Commercial Fishing Insurance Co-Op

This Seafood Task Force bill is awaiting transfer to the Governor for his signature.

Allows the commercial fishing industry to establish an insurance pool, similar to the Purse Seine Vessel Owner’s Association that operates in Washington state.

SB 156 AK Commercial Fishing & Agriculture Bank / Loans