Alaska House prepares to open budget debates amid tight fiscal constraints

When the Alaska House of Representatives begins working on amendments to the state budget Tuesday morning, lawmakers will be legislating from inside a box.

That box: Alaska’s expected revenue in the 12 months beginning July 1. The state constitution requires a balanced budget, which means no deficit spending.

In past years, legislators have spent from savings to expand their options. This year, lawmakers say, there’s not enough support for that option.

Of the $12.3 billion draft operating budget that will be debated this week, $3.5 billion — almost 29 percent — will be paid for by the federal government.

Another $2.7 billion, or 22 percent, will be paid for with fees and special accounts designated for particular programs. Think of things like university tuition and park passes.

All that money — more than half of the budget — is what legislators refer to as “restricted,” meaning that either the federal government requires it to be used in a specific way, or it flows automatically from revenue source to use via formulas in state law.

The remaining part of the operating budget — just over $6 billion — is what’s known as “undesignated general funds” and that’s the fiscal box containing most of this week’s work, because it can be spent however lawmakers wish.

There’s $3.7 billion from the Alaska Permanent Fund, the annual transfer from the fund to the state treasury. The Alaska Department of Revenue expects another $2.2 billion in oil revenue, plus $500 million in other taxes and revenue.

That would be enough to pay for the operating budget, but the operating budget isn’t all of the costs involved.

The draft capital budget, which pays for renovation and construction projects, is about $3.5 billion, and while $3 billion of that — or almost 86 percent — is funded by the federal government, the remainder will have to come from undesignated general funds.

There’s also almost $300 million in capital additions to the budget that lawmakers passed last year. Over 84 percent of that figure is from the federal government, but again, the remainder will come from undesignated general funds.

Senate leaders planned a news conference on Wednesday and were expected to say that they’re planning on $550 million in undesignated funding for the capital budget.

That, plus the operating budget, would be more than the state expects to earn in the coming fiscal year.

Lawmakers also haven’t yet budgeted for any bills they’ve passed — or plan to pass — in the last month of the legislative session. Those could cost upward of $100 million.

Preliminary figures available Monday indicated a gap of $276 million between the tentative spending plan and what’s available to spend. That gap exists even after a planned clawback of a savings deposit that lawmakers approved last year.

All of that means that when members of the House convened on Tuesday to begin discussing the budget, they’re going to be looking for cuts in order to make ends meet.

The biggest potential target for those cuts is likely to be the Permanent Fund dividend. At a planned cost of more than $1.7 billion, it’s the largest single item in the House’s draft budget, when undesignated funds are considered.

This week’s debates won’t be the last word, however. The Senate needs to approve the budget as well, and senators will have their own ideas.

A schedule negotiated between House and Senate calls for the House to send the budget to the Senate by April 12.