Alaska Legislature begins 32nd session in Juneau

The second regular session of the 32nd Alaska State Legislature began on Tuesday, January 18.

To preview what will be happening in the coming months, we spoke with Senator Donny Olson (D-Golovin) and Nome Representative Neal Foster’s (D-Nome) chief of staff, Paul LaBolle, to hear about their priorities, the budget, and the issues that will affect the region the most.

For Foster, “the main thing is going to be focusing on the budget,” LaBolle said. As co-chair of the House Finance committee, Foster looks over the budget, and specifically the operating budget, while bills are the purview of the other cochair, Representative Kelly Merrick of Eagle River.

Individual department subcommittees, led by members of the finance committee, do the meat of the work in rewriting the Governor’s budget.

LaBolle explained that while the Governor talks about having a budget surplus in both Fiscal Year 2022 and FY23 with supplementals, this is misleading. A post-transfer surplus basically means money is pulled out of savings and isn’t a good measure of fiscal health.

A better way to look at the budget would be to compare revenue and expenditures. Pre-transfer, before pulling money out of savings, Governor Dunleavy had a deficit of $501.9 million in FY22 and $348.4 million in FY23.

According to the Legislative Fiscal Analyst’s Overview of the Governor’s FY2023 Request, “Rising oil prices and strong investment performance have improved Alaska’s fiscal situation significantly, yet a structural gap remains between Alaska’s ongoing revenue and expenditures. The Governor’s FY23 budget submission narrows the gap to a few hundred million dollars per year, down from $2 billion a year ago. Still, his 10-year plan calls for deficits through FY29, which would be filled by drawing from the Constitutional Budget Reserve.”

So how did the surplus calculation come about? Through funds from the American Rescue Plan Act. Alaska received a little over one billion dollars from the federal government, as part of COVID relief. Senator Lisa Murkowski voted against it; Senator Dan Sullivan didn’t vote. Some of this money can be used to replace lost public sector revenue, among other things.

Foster and the committee get to ask: What is an appropriate use of that money? It could be used of those replacements, “or should we say, no, we’ve got a deficit, we need to figure out how to close that deficit. Maybe those federal funds are better used for other purposes, like helping out small businesses, or municipalities, or non-profits. This is all money that is supposed to be for COVID relief,” explained LaBolle.

For example, the Governor’s budget proposal for this year includes increasing the budget for corrections and public safety but pays for it using this ARPA money. A job would be created for someone, but since the ARPA funding is a one-time bill, there is no future revenue to continue paying the salary of that new job.

Senator Olson also said that there is a “maldistribution,” of the COVID money coming into the state. Instead of being equally distributed across the state, he said, all of that money is headed to where the population is. “The suspicion is that the governor’s trying to go ahead and look where he can get the most votes for his reelection. Because he was on the verge of being recalled and then COVID went ahead and saved him from that.”

Another thing that voters in the region might have on their mind heading into the election is the Nome Youth Facility that was shuttered a few years ago to save the state money. “It was the Dunleavy administration that wanted it closed,” said LaBolle. Foster had been able to save it for a few years, but the governor has line item veto authority and eventually succeeded in shutting NYF down.

Asked about saving the Power Cost Equalization fund from a potential raid, as tried last year, LaBolle said that the issue had been more or less resolved by the courts. Last August, the Alaska Federation of Natives sued the Dunleavy administration and the Superior Court ruled that the PCE Endowment was not sweepable. Superior Court Judge Josie Garton ruled that the state Office of Management and Budget is permanently prohibited from sweeping the PCE endowment fund into the Constitutional Budget Reserve. “Because the Power Cost Equalization Endowment Fund is not in the general fund, it is not subject to the sweep provision,” Judge Garton wrote. The implication is that the over $1 billion endowment is now off limits to be swept into a constitutionally created savings account from which the Legislature can borrow money, which must be repaid.

“It is a high priority to make sure we fund PCE, we still have to make the appropriations,” continued LeBolle, “but that’s just a one-year thing, around 30 million dollars. The important part was the billion-dollar endowment, and that billion-dollar endowment is now protected from [being swept into] the CBR.”

Senator Olson, works on two of the bills. One is a VPSO bill, which gives more autonomy to the nonprofits to do what they need to do recruit and retain Village Public Safety Officers.

The second big bill would have the State recognize federally recognized tribes. While the Attorney General says it wouldn’t have any effect, Olson said that “you’ll have not a condescending view or the sense of a condescension going on between the tribes and your officials in the state government.”

In addition to bills, “the other priority I have is getting a full Permanent Fund Dividend to the people out here,” he said. The governor’s proposal is for a 50/50.