School Funding

Alaska House budget committee approves millions for oil and gas drillers

JUNEAU — With high oil prices expected to bring billions of dollars in additional revenue to the Alaska state government, members of the House Finance Committee voted last week to spend $532 million in appropriations. oil and gas tax, a law that would return money to drillers, explorers and those who finance them.

The proposal was one of many approved by the committee during a week of debate on a proposed operating budget that would come into effect on July 1. The committee finished its work on Thursday and plenary discussions are expected to start on Monday.

Last spring, lawmakers approved a $4.3 billion operational budget. The proposal presented to the House this year is about $7 billion. Neither figure includes the Permanent Fund dividend or the state budget for construction and renovation projects.

The biggest difference between last year and this year is $1.2 billion earmarked for school funding for the 2023-24 school year. Lawmakers are effectively funding two years of school budgets into one, and some have referred to it as a way to save money in case oil prices fall next year.

In addition to tax credits, the finance committee also approved a one-time funding increase of $57 million for these schools, more money for the University of Alaska, and an “energy relief check” from about $1,300 per Alaskan. (The cost of this check is approximately $875 million.)

Each of these elements could change as the whole House debates the budget. When the House has finished its work, the Senate will draft its own version and the various ideas will be compiled into a final version. Alaska GOP Gov. Mike Dunleavy can veto all or part of the proposal.

One of the committee’s biggest additions to the budget is the line item that would pay out more than half a billion dollars in tax credits issued under a former subsidy for oil and gas drilling.

State law requires Alaska to repay a certain fraction of total outstanding credits each year, but Rep. Sara Rasmussen, R-Anchorage, has offered to repay them sooner.

“We have the ability to repay an obligation that the state took on when we basically begged the private sector to come explore in Alaska,” she said.

Since the middle of the last decade, lawmakers in the State House — which is controlled by a coalition of Democrats, independents and Republicans — have balked at paying out those credits, citing the needs of residents.

“At the end of the day, if we’re offering this, then…we’re not putting that money anywhere else,” Rep. Dan Ortiz, I-Ketchikan, said. “We don’t put it in the higher education fund, or we don’t put it in a PFD or it’s (530 million dollars) that we don’t have to spend on the capital budget, for example.”

But this time, attitudes like Ortiz’s were in the minority. Rasmussen’s amendment passed the committee by a 7-4 vote and received support from majority coalition members Andy Josephson, D-Anchorage, and Kelly Merrick, R-Eagle River.

“My point was just to take them off the books, and so I joined an amendment to do that,” Josephson said.

After the vote, Rasmussen said the expected windfall from oil revenues and arguments from “pro-industry” lawmakers helped the vote pass.

There was also another factor – the dividend from the Permanent Fund.

“There was another side that I think wanted to take money off the table,” she said.

Coalition members in charge of the House are supporting a 2022 Permanent Fund dividend of about $1,250, plus the energy relief check, for a total payout of about $2,500.

Dunleavy has proposed a dividend of around $2,500 for 2022, plus an additional retroactive payment that would bring the total payout to around $3,700.

The Governor’s proposal also includes a long-term change to the Permanent Fund’s dividend payment formula. But members of the House coalition say the governor’s formula is unsustainable in the long term and oppose it.

Rasmussen and other members of the finance committee said the budget was purposely written to create compromises if lawmakers wanted to increase the dividend.

For example, if oil prices or production are lower than expected, the amount of money saved will decrease. If prices or production drop significantly, the amount set aside for future funding of K-12 schools would also be reduced.

Spending more on the dividend would reduce the savings buffer, making it more likely that advance K-12 funding would be affected.

The Legislature may add money for K-12 schools later, but the advance funding is intended to provide certainty for parents, students and educators.

“Every Alaskan who has a child or loved one in any public school district would be affected,” Rasmussen said.