Without a broad deal on Alaska’s state budget, high school students could lose scholarships and rural electricity prices could double

JUNEAU – The current special session of the Alaska Legislature is more than halfway through and there is no sign of a deal yet on the state budget for the coming year. If lawmakers don’t pass – and Gov. Mike Dunleavy doesn’t sign – a state budget by July 1, the state government will shut down, and with it shut down a bunch of key services.

Lawmakers say a dire scenario is not likely, but with lawmakers divided over the amount of this year’s Permanent Fund dividend, there is a growing risk that the budget will be passed by the House and Senate when ‘by a narrow majority, without a procedural vote known as a “reverse sweep.”

Without the reverse sweep, thousands of Alaska high school students could instantly lose their college scholarships. In rural Alaska, electricity prices could skyrocket. Fishermen could lose access to low interest loans.

“This is really important to our members,” said Bill Stamm, President and CEO of the Alaska Village Electric Cooperative, which serves 58 communities, primarily in rural Alaska.

“Their electricity rates would probably double,” he said.

Alaska’s constitution prohibits budget accounts dedicated to specific recurring programs. On June 30 of each year, all accounts are automatically scanned in the state constitutional budget reserve.

But lawmakers have long used a procedural workaround to preserve funding for privileged projects. Each year, with the support of three quarters of the House (30 out of 40 members) and three quarters of the Senate (15 out of 20), they vote to “go back”. The money goes into the budget reserve at 11:59 p.m. on June 30 and is withdrawn immediately at 12:01 a.m. on July 1.

This procedure has become so standardized that the state budget is written as if the reverse has been done in advance. Programs are paid for with money from designated funds, and some of those funds automatically collect fees or investment income for later use.

The more than $ 1 billion PCE fund subsidizes residential electricity prices in rural Alaska. The Higher Education Fund awards scholarships to high school students in Alaska.

Since 2016, the Alaska House has been tightly divided between a coalition majority and a Republican minority. To get the 30 voices needed for the reverse sweep, both parties need to agree.

Two years ago, the minority sought to increase this year’s Permanent Fund dividend amount and withheld their votes on the reverse sweep for leverage.

Letters were sent to high school students and their families saying the money was not available to pay their scholarships. Power companies serving rural Alaska have warned that sudden rate increases are imminent.

The minority then agreed to a deal that restored funding, and in a session precipitated by COVID last year, lawmakers did not attempt to use reverse sweep as a negotiating tool.

Jeff Turner, spokesman for the governor, said in a written statement that the administration expects the legislature to vote and pass the reverse sweep this year. He didn’t say when.

The reverse sweep shouldn’t be an issue in the Senate, but it should be in the House, where the majority back a dividend of no more than $ 1,000, but many Republicans want a dividend of around $ 2,300, according to with a long-term proposal approved by Dunleavy.

Rep. Bart LeBon, of R-Fairbanks, said getting 30 budget votes this year will be “more difficult than it was last year and the year before.”

House Minority Leader Cathy Tilton, R-Wasilla, said lawmakers on her side of the aisle did not oppose programs under reverse sweep.

“It is a negotiating tool,” she said.

“I think there is a misconception that the Republicans in the House are sort of not in favor of these programs. And that it is far from the truth, ”she declared.

She and Stutes each said they plan to speak later this week about the matter.

Lawmakers say there is political strategy at play in these negotiations. The governor called a special session for August so lawmakers could discuss a constitutional amendment that would guarantee a dividend from the Permanent Fund and firmly cap annual transfers from the Permanent Fund to the treasury.

Tilton said minority Republicans would like to see action on the proposal.

But members of the House majority and some senators said the governor’s proposal needed additional elements, such as a statewide sales tax or a stricter spending cap, before to be seriously considered. These items are not on the agenda of the current special session, but they could appear in August.

LeBon is the main minority budget negotiator and asked a rhetorical question: If the PFD and reverse sweep is not resolved, would that encourage lawmakers to meet again in August and take things seriously?

“Maybe the policy of this is to pass the budget and leave the PFD for August,” he said.

But without a timely reverse sweep, the budgetary effects will arrive before the special session begins.

Michael Rovito, deputy director of the Alaska Power Association, said his organization “is begging lawmakers and the executive to consider the uncertainty and financial hardship failure to reverse the sweep would have for people in the regions. rural Alaska and the electric utilities that serve them “.

“If Alaskan consumers cannot afford to pay their electric bills without the help of PCE, it will have far-reaching impacts,” he said.

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