Senate Finance adopts $13.8B budget with $150 energy payments, school grants

The Alaska Senate Finance Committee adopted a $13.83 billion operating budget Thursday that includes $150 energy relief payments for every Alaskan and up to $100 million in one-time grants to school districts.

The committee structured the budget to maintain a $50 million reserve for fiscal year 2027 supplementals by using a conservative oil price assumption of $73 per barrel rather than the $75 forecast. That $2 difference reduces projected revenue by $68.8 million, creating a cushion against the volatility that has plagued recent budget cycles. The approach leaves the Senate with a surplus of $51.3 million compared to the House's deficit of $385.6 million.

Pete Eklund, staff to the committee chair, walked members through the changes. The energy relief payment of $96 million will be added to the October Permanent Fund dividend. After that payment, up to $100 million will go to school districts as grants distributed through the adjusted average daily membership formula, the same method used for base student allocation funding but outside the regular formula.

"In Section 11(a)(1), there's a $150 per person energy relief payment added to the October Permanent Fund dividend at a cost of $96 million of general funds," Eklund said. "In Section 11(a)(2), after the appropriation made in (a)(1), up to $100 million of general funds to the Department of Education and Early Development to be distributed as grants to school districts following the adjusted average daily membership formula."

The budget includes an additional $29.1 million in energy relief specifically for school districts. Legislative Finance calculated the amount by taking each district's highest reported energy costs over the past three years and multiplying by 30 percent.

Alexei Painter, director of the Legislative Finance Division, presented updated fiscal projections showing how the energy and education payments would work in practice. The actual amount school districts receive depends on final revenue numbers, which will be determined using preliminary actuals as of August 31.

Under current revenue projections, school districts would receive $59.3 million of the available $100 million. If oil prices average $95 per barrel for the remainder of the fiscal year, districts would receive the full $100 million, with any surplus going to the statutory budget reserve.

The budget increases retirement system payments to meet actuarially determined contribution rates. The on-behalf payment for the Public Employees Retirement System unfunded liability rises from $75.3 million to $106.3 million, while the Teachers Retirement System payment increases from $157.2 million to $164.1 million.

The committee added $50 million to the Community Assistance Fund, bringing its fiscal year 2027 ending balance to $90 million. That ensures a $30 million payout for fiscal year 2028. An additional $20 million will fund a separate community assistance base payment intended to help communities with high fuel and shipping costs.

For disaster response, the budget doubles the Disaster Relief Fund appropriation from $24 million to $48 million. The state faces tens of millions in costs from recent disasters including the Ahlong storm, though final amounts remain uncertain.

The Alaska Marine Highway System receives $3.5 million for maintenance of effort and salary adjustments, plus $49.5 million in backstop funding if no federal operating dollars arrive in fiscal year 2027. That backstop appropriation is expected to be zero after the Federal Transit Administration issued a notice of funding opportunity in recent weeks.

Painter cautioned the committee about relying on narrow fiscal margins, pointing to a $400 million swing in last year's budget projections. What appeared as a $190 million deficit requiring a draw from the Higher Education Fund turned into a $160 million surplus in the final accounting.

"I would encourage the legislature to generally adopt some caution, not try to spend literally every dollar that's projected to be available and to use, you know, a fund as a backstop," Painter said. "Traditionally, that's been the CBR. But again, to just understand that, that there is a margin of error here."

The timing of federal reimbursements, post-audit revenue adjustments, and agency encumbrance releases all contribute to differences between budget projections and final accounting numbers. The state's Annual Comprehensive Financial Report has not met its statutory mid-December deadline in about a decade, coming out in late February this year.

The constitutional budget reserve sweep this year totaled less than $8 million, down from larger amounts in previous years. The committee structured several appropriations to reduce future sweep amounts by directing lapsing balances from job training programs back to the Unemployment Trust Fund.

The budget bifurcates the Office of the Governor, with half effective July 1 through December 31 and the remainder effective January 1, 2027. The approach matches what the legislature did during the last gubernatorial election. A separate appropriation was created for the lieutenant governor.

For the University of Alaska, the budget adds $15 million in federal receipts and $750,000 in university receipts for a critical mineral accelerator program, contingent on the National Science Foundation awarding a grant to the University of Alaska Fairbanks in calendar year 2026.

The committee also adopted the mental health budget with similar contract approvals for correctional officers, higher education trades employees, and Fairbanks firefighters.

Amendments to the operating budget are due to Eklund's office by 4 p.m. Friday. The committee scheduled its next meeting for Friday morning at 9 a.m.