During a Saturday afternoon visit to the First City, Sitka Sen. Bert Stedman spoke with the Daily News about the state of the Legislature, budgeting, and what to expect in the budget for local education, the Alaska Marine Highway System and Alaska Permanent Fund dividends.
A better year
Stedman said this year in the Legislature has gone better than recent years. It was much easier to agree on the need to save extra state revenue from high oil prices than it has been in the past.
“The biggest difference that I've noticed this year, if we go back 15 years or so when we started building up the (state’s) savings — I chaired the (Senate) Finance Committee at the time — … I think we first put $30 million in the … Constitutional Budget Reserve, and that was, like, just a token amount. But to get most of the Legislature to recognize the value of putting some of (that) money away took a couple years.
“This year, when we started, I talked to my colleagues about, we had to do what we did before, 15 years ago: do our major maintenance or deferred maintenance, get caught up on that, fix our broken projects before we add a bunch of new ones, and build our savings position back,” he continued. “And the savings conversation was, I'd say about three weeks, it was pretty much over — there was a majority of us (that) said, that's the direction.”
Stedman confirmed that School Bond Debt Reimbursement is fully funded in the Senate’s proposed budget. Senators will further discuss whether to catch up on previous years in which SBDR has been unfunded and underfunded, which would cost about $300 million.
He also reiterated that the Legislature will include funding for local schools, likely in the form of a one-time supplemental appropriation of about $50 million, to be divided up using the same formula the state uses to calculate funding for each school district. That amount would provide the Ketchikan School District about $1 million.
Some members of the Alaska House of Representatives are hoping to secure a statutory increase to the base student allocation, the per-student amount the state uses to calculate each school district’s local education funding, which hasn’t been raised since 2014. And the Ketchikan Gateway Borough Assembly and the Ketchikan School District recently signed a joint resolution urging such increases.
Stedman said that he’s still reluctant to push for a statutory increase, concerned that other legislators would take advantage of the opportunity to reduce funding to more rural Southeast Alaska communities.
“I don't think we're quite ready for that,” he said of a statutory increase. “I'm always cautious whenever … we open that formula up, because the rail belt, when they want to redo the formulas, take it from rural — us — for them. So we're — the rural guys — are very hesitant to monkey with that formula unless we have an agreement. We're afraid we'll come up short.”
Still, he noted, lawmakers who are hesitant to approve more local education funding — whether through a statutory BSA increase or supplemental funding — “recognize the financial pressure the schools are under.
“So, it’s gonna happen,” he added. “It’s just a matter of the dollars.”
The Alaska Marine Highway System appears stable for the time being, he said, bolstered by up to $200 million in federal funds secured by Alaska Sen. Lisa Murkowski that could help with operations and the construction of replacement vessels.
“On the bright side, the marine highway's not going away — so it's now just a matter of getting it restructured, because a couple years ago it was pretty dicey,” he said. “So I thank (Murkowski) for that. … She took a lot of heat internally, back East, for it. And she's asked that we put state money in the marine highway because it kind of reinforces her — otherwise it hangs her out.”
Stedman said he’s expecting that this year’s Alaska Permanent Fund dividends won’t be lower than about $1,600, which equates to roughly 50% of the money that the Senate would draw from the Permanent Fund’s Earnings Reserve this year. He still doesn’t support splitting the Permanent Fund earnings 50-50 between government services and dividends, respectively, instead favoring a 75-25 split.
“If they generate $800 million in tax revenue or close that gap, budget cuts or tax revenue, then … we could go to a 50-50 dividend,” he said. In other words: “It’s unaffordable. And they're not gonna raise 800 million.”
A 75-25 split would be more sustainable, he added.
“When you look at the operating budget, the operating budget isn't shrinking, it's getting slowly bigger, and that means you're gonna have to have more tax revenue to get to a 50-50 (split),” he said. “And I'm not personally inclined to put a bunch of taxes on people to pay a dividend, when we can … safely pay a 25% dividend out and increase the dividend if we need to, if we have an oil price shock, right? There's nothing that stops us from doing that.”
Stedman pointed out a few differences between the governor’s proposed budget and the draft budgets coming out of the House and the Senate.
“When you take out all of the funny money and the maneuvers, the governor's budget is up probably a little over 4%,” compared to last year’s budget, he explained, while the House budget will be about 6-7% bigger and the Senate budget will “probably come in somewhere in the middle, … maybe 5%.”
The governor’s budget increase primarily comes from the proposed addition of 233 jobs, “and adding a bunch of stuff that was vetoed … or reduced clear back to (the administration of former Gov. Bill) Walker, like two pages of it,” he added. The House budget includes about three more positions on top of that, while the Senate budget likely won’t fund all of those positions.
For example, Stedman said the Senate won’t budget for 17 new Alaska State Troopers positions that Gov. Mike Dunleavy had included in his budget without specifying how those positions would be funded.
“We think … they don’t need the funding in their budget. They can do that. So we’ll not most likely fund those troopers, and we’ll haggle that out with them,” said Stedman.
The governor’s budget also proposes giving “primacy” to the Alaska Department of Environmental Conservation, he explained: “Having the DEC administer … a lot of the (U.S. Environmental Protection Agency) stuff.”
But “some of us are concerned that it’s gonna add 30 people to the rolls or so … (and that) they’re gonna be running around micromanaging little tiny projects — you know, basically the guy on the street trying to do something — rather than concentrate on the big issues.”
If such a change is to be implemented, he said, it should be done at the beginning of the next gubernatorial term to address any unforeseen problems that arise in implementing it.
The big picture
In summary, Stedman said: “I guess the message (is) that, although I don't really like delivering it, the operating budget's gonna be bigger this year than it has been in the last four or five years. The last four or five years of operating budgets have been going sideways: We've cut the university. We've cut the marine highway. (And) those reductions were absorbed (by increases) in corrections and public safety (spending). So we need tally it all up.”