Dear friends and neighbors,
I hope this update finds you well and in good spirits.
As we approach the final month of session, I want to update you on our state budget and the status of my fisheries legislation.
This is an extremely challenging year for our state budget. At the start of session, the budget was $1.9 billion in deficit spending and a draw from our dwindling Constitutional Budget Reserve (CBR) was needed to fund state operations in FY26 and FY27. Yet again, the governor handed us a budget with a full PFD while ignoring the deficit and other essential state services. This feels like déjà vu.
Regardless of what the governor proposes, it is the Legislature’s constitutional duty to pass a balanced budget. Further, my commitment to you has always been to protect the services that coastal communities rely on, move the state forward on a fiscal plan, and leave the next generation of Alaskans on solid footing; I will not waver from that commitment.
On March 14, The Department of Revenue (DOR) released a spring revenue forecast that further muddies the budget waters. Although the forecast projects a revenue increase of $544 million in FY26 and $510 million in FY27 due to the increased price of oil, the volatility of global oil markets is the second highest on record according to DOR, making any predictions particularly unreliable. As it sits currently, the state no longer needs a CBR draw to fund FY26 operations, but extreme caution is warranted when viewing FY27 revenue.
What this revenue swing clearly shows is that Alaska desperately needs a fiscal plan; without one, the state is too reliant on the whims of oil to adequately fund the critical needs before us. There is universal agreement on the need for a fiscal plan, but consensus on what exactly that looks like has been very difficult to achieve. I support a reasonable statutory PFD rewrite, which virtually all lawmakers agree needs to happen, oil and gas tax reform, closing our corporate income tax loophole, as well as other small revenue measures. I will get into the various revenue measures in my next update, but let’s move on to the budget for now.
As I write this, it is Tuesday, April 7. The operating budget, HB 263, is on the House Floor for amendments starting tomorrow. A full statutory PFD of $3,824 was amended into HB 263 before it moved from the House Finance Committee; however, only $1,500 is supported by general funds, with the remaining $2,324 relying on a CBR draw (which requires a ¾ vote from the members of each body).
For all intents and purposes, the PFD is $1,500 in the current budget, as there is virtually no chance the CBR draw will be approved. A CBR draw of this size, which is $1.5 billion, would liquidate our only savings account, jeopardize state services, and leave the state on extremely precarious footing moving into FY27. I’ve always called a spade a spade: The full PFD amendment adopted in House Finance is, at best, disingenuous to Alaskans. The state simply cannot afford it, and it has little-to-no chance of being approved.
However, I want to recognize that aside from additional revenue to the state, higher oil prices mean higher costs to Alaskans for heating, fuel at the pump and dock, as well as goods and services; as such, we are looking at as large of a PFD as we can afford this year, potential energy relief payments in 2027 if the revenue increase holds, as well as additional support to heating assistance programs this year.
As things currently stand, here are some highlights in the budget.
First, we added a $158 million one-time increase to K-12 education funding (which equates to a $630 BSA increase). We have heard educators and families loud and clear that our schools desperately need additional funding. As much as I support a BSA increase, it is unlikely to pass the Legislature or survive a governor’s veto this year. Given that, I am pleased that we were able to add one-time funding. This will serve as a necessary stopgap measure while the fate of various education bills remains uncertain. We are also looking at additional funding for fuel subsidies, pupil transportation, and inflation proofing for our school budget.
Regarding the Alaska Marine Highway System’s (AMHS) budget, there is some good news and some bad news. The good news is that AMHS is set to receive an award of up to $410 million from the federal Infrastructure Investment and Jobs Act’s (IIJA). The bad news is that the notice of funding opportunity (issued on April 6) was delayed, with awards expected no earlier than September. This leaves AMHS with an operational shortfall in FY27 until IIJA funds are received.
This past Wednesday, The Alaska Department of Transportation and Public Facilities (DOT) presented several contingency plans to maintain full ferry service until the federal funds are received, as well as an overall status update of the system; the presentation has a lot of good information. You can watch that hearing by typing bit.ly/41ilOfx into your web browser. The presentation DOT is speaking to can be found at bit.ly/4t34nvA.
Not leaving things to chance, I worked closely with the House Finance Committee to add $49.9 million in state backstop funding for AMHS in case federal funds are further delayed or the award is less than expected.
Out of the of IIJA funds for rural ferry systems, AMHS is requesting $161.2 million in operating assistance and more than $200 million for capital expenditures, which includes any cost overruns on the M/V Tustumena replacement, the mainliner replacement vessel, and other AMHS capital expenditures; these federal awards will cover a two-year funding period.
Although I am pleased to have access to federal funding, it’s highly concerning that 46% of AMHS’s operating budget is funded through federal dollars that may not be available from year to year. My goal is to get AMHS back on consistent state funding for its operations, with one-time federal funds being used exclusively to rebuild our fleet.
The ferry system is our highway and a vital public service that will only improve and grow through increased investment by the state; I will continue to fight tooth and nail until that is a reality.
On that topic, the replacement M/V Tustumena is currently out for bid and is generating interest from shipyards. Bidding closes on May 28 of this year with an expected completion date on Jan. 31, 2029. I will be holding DOT’s feet to the fire on this project to ensure that it stays on track.
Other notable items added to the operating budget are: $400,000 for in-season genetics testing of western Alaskan chum salmon; $7.5 million for childcare workforce recruitment and retention; $10 million for the community assistance program, bringing the distribution amount to $30 million; $272 million in federal authority for the Rural Health Transformation Program; $25.7 million for disaster relief; $13.1 million for fire suppression; and an additional $10.3 million to fully fund school bond debt reimbursement.
I will be sure to update you on where things stand after the amendment process on the House Floor. Amendments will take several days at least and could run into the weekend. You can watch floor sessions on the budget, or any committee hearings live by typing bit.ly/4dd878Q into your web browser. You can view the budget and track amendments at bit.ly/47sRlyQ.
Moving on to my fisheries legislation: HJR 29, which calls on our federal government to extend the ban on Russian seafood imports, passed the Legislature last week. The executive order banning Russian seafood imports into the U.S. is set to expire on April 15, and HJR 29 calls on our federal government to extend that executive order. The resolution is currently on its way to the president’s desk. I was proud to introduce and pass this legislation on behalf of the seafood industry. To view the bill documents or watch the committee hearings on HJR 29, please type bit.ly/47T91Uz into your web browser.
HB 117, which was brought to my office by concerned stakeholders in Kodiak, would preserve the traditional cooperative setnet model in Alaska. The legislation was introduced in response to recent enforcement efforts that would upend the way setnet operations have traditionally been carried out. HB 117 passed House Floor by a vote of 39-0 and has been referred to the Senate Resources Committee for further consideration. To view the bill documents or watch the committee hearings on HB 117, please type bit.ly/4m46FI3 into your web browser.
HB 33, my conflict-of-interest bill for the Board of Fisheries (BOF), is at the finish line. The bill moved from the Senate Resources last week and is currently in the Senate Rules Committee awaiting calendaring on the Senate Floor. This legislation has been a priority of the United Fishermen of Alaska and commercial user groups for over 20 years, and I’ve been sponsoring it for eight years. This is furthest this bill has ever been in the process, and I’m excited to see it finally within striking distance of becoming law. To view the bill documents or watch the committee hearings on HB 33, please typebit.ly/47xiS20 into your web browser.
As long as we are on the topic of BOF, I am keenly aware of the public process, ethics, and other concerns negatively affecting coastal communities and commercial user groups during board proceedings. As a legislator, I have always avoided weighing in on board decisions; however, when it involves blatantly poor public process, that is a different matter. My office is currently working on introducing comprehensive BOF reform legislation that puts side bars on board generated proposals, ensures the integrity of our ethics laws, and other necessary reforms to preserve public trust and public process on the board.
My next update will cover the budget after amendments, fiscal plan options, as well as education and retirement system legislation under consideration.
As always, please remember that I work for you. Feel free to reach out to my office any time at 907-465-2487, email [email protected], or call my cell directly at 907-942-2120.
Sincerely,
Rep. Louise Stutes
Proudly serving Kodiak, Cordova, and Seward
Now that The Cordova Times is transitioning to an online publication, we’re committed to delivering vital local news through our digital offerings. Subscribe to our free email newsletter here.
