Day 14: Education funding, the budget and carbon offsets
With a big call for increased education funding, it's hard to ignore the governor's budget doesn't exactly have a lot of room for new spending and that new revenue is a long ways off.
Good morning to everyone other than the NFL refs!
It’s Day 14 of the legislative session.
Here’s the big things to know as we head into the third week of session: The Senate is pushing ahead with the education funding discussion. After holding a series of meetings that painted a grim-to-dire picture of the state’s education system, the Senate Education Committee is opening things up to public testimony and has also put BSA increase legislation on the agenda. Of course, this is all against a less-than-rosy financial picture for the state, which is counting on new, targeted revenue coming online sooner rather than later. That new revenue is not likely to be coming from the governor’s new carbon sequestration program, which dropped on Friday to a “We need to learn more about this, potentially over several years” response from legislators. Also, the daily schedule and a look at the week ahead.
Current mood: 🤓
Programming note: There are some behind-the-scenes changes going on for me right now that may interrupt things a bit this week, but things should be good. Stay tuned.
Senate pushes ahead with education funding
Hot off a week of invited testimony on the state of education funding in Alaska, the Senate Education Committee is set to begin taking public testimony on the issue today and has hearings scheduled later in the week on legislation to increase the base student allocation that’s used to determine K-12 funding.
Put simply, Alaska’s schools are in a precarious position because the state hasn’t meaningfully increased education funding in years. The problems were largely papered over by a combination of one-time funding and an influx of federal covid money in recent years, but with that money expiring districts are now finding themselves with million-dollar-plus deficits with little recourse other than closing schools and ballooning class sizes.
The Senate Education Committee has taken the lead on this issue, holding several hearings in the last week to understand the extent of the problem and get different perspectives on the issue. It’s been a bit of fresh air, sparing us of the tired complaints that Alaska’s already spending the most per-pupil of any state in the nation while ignoring the fact that the cost of delivering education in Alaska is pretty high.
Here’s a breakdown from Friday’s presentation by the UAA Institute of Social Economic Research that shows, yes, the nominal dollars are higher than the national average but that buying power is below the national average once you factor in the cost of educating in Alaska.
The House Majority—and Gov. Mike Dunleavy—are the big question marks in this process. At their introductory news conference, members of the House Majority brought up far-right Alaska Policy Forum, which has advocated for cuts to state services and that schools should be more accountable. House Education Committee co-Chair Rep. Justin Ruffridge told the ADN he was open to an increase, but suggested a number far lower than what advocates are suggesting: $250 to $750 versus the $1,000+ some are requesting.
The Senate Education Committee has public testimony on school funding scheduled for its Monday and Wednesday meetings, both at 3:30 p.m., and has also put BSA increase legislation on the agenda for its Wednesday and Friday meetings.
Interestingly, the House Education Committee—whose other co-chair is Rep. Jamie Allard—has yet to meet a single time this session and hasn’t scheduled a single hearing for this week.
The schedule for Monday
The Senate Finance Committee hears from the Legislative Finance Division at 9 a.m. to get some real talk about the budget
The House and Senate both have citations-only floor sessions at 11 a.m.
House Judiciary Committee meets at 1 p.m. for an overview on the court system
House Resources meets at 1 p.m. for an overview of oil and gas activity
House Finance gets its capital budget overview at 1:30 p.m.
Senate Judiciary meets at 1:30 p.m. to hear SB 38, interference with emergency services
Senate Labor and Commerce meets at 1:30 to get the nonprofit perspective on workforce issues
House Labor and Commerce meets at 3:15 to hear HB 13, applicability of the Human Rights Commission; and HB 46, child care collective bargaining
Senate Education meets at 3:30 to continue its hearing on challenges facing public education and will also be taking public testimony on K-12 funding
Senate Resources meets at 3:30 to get a Cook Inlet gas update
The budget picture isn’t great
In the backdrop of the education funding debate is the state’s ongoing financial uncertainty.
The Dunleavy administration’s budget overviews these past two weeks have, at best, been a stark reminder that Alaska’s budget will be extraordinarily volatile as long as oil plays a big part of the revenue picture. We’re about seven months away from all the cheery headlines about the governor signing the first balanced budget in a years, which at the time seemed like it was framed as a turning point for the state. Of course, it was historic investment returns and high oil prices driven by a war all layered with a revenue forecast that expected those war-driven prices to stay high.
Just seven months later and the surplus the Legislature had expected to forward fund some $1.2 billion in education funding has dwindled down to just $49.4 million, a figure that budget director Neil Steininger told the House Finance Committee last week could very well fully vanish by the time the new fiscal year rolls around on July 1.
The governor’s budget with its full, statutory PFD (costing nearly $2.5 billion) runs a deficit of nearly $300 million, a figure that the senators overseeing the budget expect to grow once they review the budget and other costs get accounted for. On the most status quo of budget projections, which includes the bare minimum spent on the state’s infrastructure, Alaska runs a deficit for the next decade.
“You’re in the first few weeks of your four-year term and without this new revenue, it doesn’t even look like you’ve got the cash to get to the end of your term without going to the Permanent Fund,” said Senate Finance Committee co-chair Sen. Bert Stedman to Steininger during a hearing last week, “so that’s a problem.”
To balance the budget, the governor isn’t suggesting another round of draconian budget cuts but is instead suggesting the gap be filled by a yet-to-be-created source of targeted revenue or overdraws on the state’s savings accounts, which would most likely be the Alaska Permanent Fund’s earnings reserve account. For many legislators, though, drawing down the permanent fund is a hard no because they fear it could lead to a spending spree that would undermine the fund’s health in the long term.
The whole situation ought to put some major question marks next to the education funding debate as well as looming financial issues like the roughly $100 million match that needs to be put up to secure $285 million in federal funds for the ferry system.
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Turning carbon into cash
At the very least, Gov. Mike Dunleavy has abandoned his only real revenue proposal from his first term—legalized gambling—in favor for carbon sequestration measures, which claims could raise billions of dollars in new revenue from companies looking to reduce their net carbon footprint by paying Alaska to pump carbon underground or hold back from cutting trees.
The legislation outlining both of those proposals landed on Friday, with the initial reaction from legislators being, basically, “We’ll take our time to look at it.”
Senate Resources Committee co-Chair Sen. Cathy Giessel has said the Legislature needs to study the issue down to its finest details, like whether the types of trees matter or what happens in the case of a forest fire. It’s a process that could take years for the Legislature to complete, which is complicated by the Legislature’s need to find brand-new consultants after Dunleavy tapped their go-to consultants for the project.
“You’ll probably hear us very much threading a needle,” Giessel told the Alaska Beacon, adding that she planned to start hearings in mid-February on the issue. “We’re not wanting to discount or in any way vilify the (proposal). Of course, we’ll look at it. It’s just more complicated than it seems.”
A big issue for the governor to overcome will be the long-standing reluctance of legislators to lock away land from development. With a long, somewhat skeptical path to passage, it’s also an open question whether the governor will see it through.
Either way, carbon offsets are not likely to play any immediate role in alleviating Alaska’s budget pinch any time soon.
Schedule for the week ahead
On Tuesday, the House Community and Regional Affairs Committee is set to take public testimony on the firefighter/police officer pension bill at 8 a.m.
Also on Tuesday, the Senate Finance Committee has a curious-sounding hearing at 9 a.m. for “Administration Response to Prior Meetings” with Revenue, Natural Resources and budget up.
On Wednesday at 11 a.m., Alaska Supreme Court Chief Justice Daniel Winfree will deliver his final State of the Judiciary address before his retirement this summer.
On Wednesday at 3:30 p.m., the Senate Education Committee will be getting a hearing on cost estimate for an increase to the base student allocation with legislative finance. Also on the agenda is a yet-to-be-introduced bill dealing with the BSA increase.
In an after hours meeting, the House Ways and Means Committee will be meeting at 6 p.m. on Wednesday for an overview on the fiscal policy working group’s report. This committee also recently hired none other than Donna Arduin as its policy advisor.
On Thursday at 9 a.m., the Senate Finance Committee gets an overview of the state’s oil tax structure.
Also on Thursday, the Senate Community and Regional Affairs Committee will be getting overviews with the departments of Public Safety and Corrections.
Friday looks like it’ll be a quiet day with only the Senate Education Committee’s 3:30 meeting and the House Resources Committee’s 1 p.m. that currently have agendas.