- Associated Press - Friday, March 1, 2019

JUNEAU, Alaska (AP) - Alaska legislative leaders signaled concern on Friday with two provisions of Gov. Mike Dunleavy’s budget that critics see as shifting financial burdens onto local governments.

Senate President Cathy Giessel told reporters she doesn’t see support among her members for a change in petroleum property tax collections that would benefit the state but pose a financial hit to some communities.

House Speaker Bryce Edgmon said he doesn’t see support in his chamber for that or for no longer sharing certain fisheries-related tax revenue with qualified communities.

Dunleavy’s budget proposal relies on revenue from those two pieces to help fill a roughly $450 million chunk of the state’s projected $1.6 billion deficit, according to the Legislative Finance Division. His budget proposal also taps some reserve accounts and includes sweeping cuts or changes to areas including education, health and social service programs and the state ferry system, a transportation link important to southeast coastal communities. Dunleavy is not proposing any new statewide taxes.

Lawmakers are trying to piece together their own version of the budget, with the House expected to take the first crack.



House Finance Committee Co-Chair Neal Foster said the budget emerging from the House would be flat “at best, with preferably some cuts.” He did not specify what level of cuts the House might be eyeing.

Senate Finance Committee Co-Chair Bert Stedman, a Sitka Republican, said Thursday he expected substantial budget reductions but did not define substantial.

Foster said he and Stedman want to try to work with Dunleavy to see what’s acceptable to him, acknowledging the governor’s veto power.

“If we can minimize the amount of red ink that gets splashed around at the end of session or this summer, obviously that’s better. So we’re gonna try,” said Foster, a Nome Democrat.

Dunleavy spokesman Matt Shuckerow said the Republican governor looks forward to working with legislators.

In an interview this week, Dunleavy said he was serious about resolving the state’s fiscal situation this year and would use “every tool available to make sure we have our fiscal house in order.”

The size of the dividend Alaskans receive from the state’s oil-wealth fund, the Alaska Permanent Fund, will be closely watched as the budget debate unfolds.

Foster, who is part of a bipartisan House majority coalition, said the first priority is crafting a responsible budget that considers education, public safety, health care, “all the services that Alaskans expect,” and come up with something House members can agree on. “That’s our No. 1 priority, and that’s going to determine where we land” with the dividend, he said.

The House majority coalition is binding, meaning members are obligated to vote for the budget.

Legislative leaders in both chambers have said they want to preserve savings and not overspend from permanent fund earnings. Lawmakers last year began using fund earnings to help pay for government costs, after going through billions of dollars in savings as they grappled with the deficit and facing limited options amid disagreements over potential taxes and the level of further budget cuts. Fund earnings also are used to pay the dividend, creating tension.

A state law passed last year seeks to limit what can be withdrawn from fund earnings for government costs and dividends. The amount for the upcoming fiscal year is $2.9 billion. Dunleavy, who campaigned on a full dividend, has eyed $1.9 billion of that for a full dividend payout. Payouts the last three years were capped amid the ongoing deficit.

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