Gov. Mike Dunleavy last week released a proposed state budget which would hold funding mostly steady for many borough priorities — but only by spending half the state’s remaining savings.
Under the state budgeting process, the governor is tasked with penciling out the starting point for the annual spending plan in December. In January, the state legislature will begin meeting and editing the proposal before it votes on a final budget in late spring.
Borough priorities
Along the way, the Haines Borough has some opportunity for input, passing along its recommendations for state spending priorities, as well as naming specific borough projects it hopes to receive state money for.
While those priority lists have not yet been finalized, last year gives some indication of what the borough might be looking for, with the previous assembly naming education, state troopers, and the Alaska Marine Highway System as its top priorities for state spending.
As the governor has it drawn up right now, those three areas would see similar funding to last year.
On education, last year’s funding came out of a heated tug of war between the governor and legislators. Through last winter and spring, Haines Borough School District officials lobbied state lawmakers for more funding, calling the district’s cuts a “make or break point” — a message echoed by districts across the state. In response, a bipartisan majority of state legislators approved an increase to the amount of money the state pays per-student to districts, only for the governor to veto the increase. In an August special session, however, the veto was overridden by the state legislature. And now, Dunleavy’s current draft budget proposes “full statutory funding for K-12 education.”
That would indicate a plan by the governor to fund schools to the full per-student rate passed into law by the legislature last session.
The full details are not clear. The actual dollar figure written into the draft budget for K-12 school aid, which is made up of the per-student payments plus transportation funding for schools, would be a $25 million decrease compared to last year. This year’s total is $1.365 billion, compared to last year’s total of $1.390 billion.
As for the other two priorities, the governor’s proposal calls for a slight bump to state trooper funding, and a roughly 2% decrease to the Alaska Marine Highway’s operating budget.
Deficits and dividends
All that could change once the legislature starts its work, especially given a $1.5 billion deficit in the governor’s budget.
To close the gap, Dunleavy’s plan would spend half of the state’s remaining $3 billion savings.
The deficit has been opened up in large part due to decreasing state oil revenues. The Alaska Department of Revenue projects $1.44 billion into the state’s coffers from oil revenue next year. That means oil revenue would have to more than double to balance the governor’s proposed budget.
Contributing to the deficit is the governor’s call for a $3,650 per person permanent fund dividend, with the total bill for dividend payments coming out to around $2.47 billion. Given recent history, that could be an area targeted for cuts by legislators. Last year, Dunleavy proposed an almost $3,900 dividend. Legislators cut that figure to $1,000 per person, which cut roughly $1.7 billion in spending.
Capital projects
The Haines Borough Assembly plans to discuss its funding priority lists at their meeting this week. That will include requests for state funding on capital projects, which last year included Letnikof Dock floats, the new Public Safety Building, and an expansion to the borough Administration Building.
There’s less total money available for capital projects, however, in the governor’s budget, down 32% from last year.
10-year outlook
Past this year’s budget question, there’s no definitive plan for how the state might address the bigger-picture drop-off in state oil revenue.
In October, Haines’ state senator Jesse Kiehl told the Chilkat Valley News he hoped Dunleavy would include a long-term fiscal plan with his draft budget. Dunleavy has indeed done so, but it provides little answers.
According to the governor’s 10-year plan, permanent fund dividends would rise above $3,000 per person by the 2036 fiscal year, and the state’s total operating budget would increase 62%. Oil revenue is projected in the plan to rise, but by a far smaller amount. The remaining spending increase would be covered by well over a billion dollars in so-called “new revenue measures.” The governor has not said what those new revenue measures would be.