Lawmakers still haven’t resolved the looming deficit caused by a collision between education spending, the PFD, and lower oil revenue
By: James Brooks and Corinne Smith – April 7, 2025 5:00 am The Alaska Beacon
With more than half of Alaska’s regular legislative session over, attention in the state Capitol is focusing on a limited set of topics.
Before their scheduled adjournment in mid-May, leading legislators say they intend to pass a public school funding increase, enact one or more bills that would increase corporate taxes, and set the budget — including this year’s Permanent Fund dividend.
What’s the state of education funding?
Right now, the House’s draft operating budget includes a funding boost for K-12 public schools that’s worth more than $250 million. Without additional legislation, that’s only a one-time boost.
On Wednesday, the Senate Education Committee advanced House Bill 69, which would permanently boost per student funding by $1,000, to $6,960 per student, and incorporates a variety of education policy changes like open enrollment statewide and capping class sizes.
The per-student increase would cost $253 million, plus an estimated $22 million for reading incentive programs, $706,000 for Mt. Edgecumbe High School, and over $158,000 for a new state charter school coordinator, totaling over $275 million.
Sen. Löki Tobin, D-Anchorage and the education committee chair, said she was aiming to find common ground through the latest version of the bill.
The bill moved to the Senate Finance Committee on Friday, but has not been scheduled for a hearing yet.
Gov. Mike Dunleavy took to social media on Thursday to criticize the education committee’s version of the bill, saying that it would “inequitable constraints” on students enrolled in correspondence programs. The bill would tie funding for these programs — which serve most of Alaska’s homeschool students — to students being assessed through a standardized test or portfolio.
Dunleavy introduced education legislation in January through the House and Senate to provide one-time funding for schools, and added a range of policy changes, including an expansion of the correspondence programs that enroll most homeschool students in the state. The proposal would cost an estimated $181 million next year, including $75 million for the homeschool students as well as career and technical education, and $14 million for transportation.
That measure, Senate Bill 62, is currently being heard in the Senate Education Committee, and its counterpart in the House, House Bill 76, is in the House Education Committee, with the next hearing scheduled for Friday, April 11.
How will Alaska pay for it all?
In recent years, the Alaska Legislature has used the amount of the Permanent Fund dividend to balance the budget, raising the dividend in good years and lowering it in bad ones rather than follow the dividend formula in state law.
Because of low oil revenue and the desire for more public school funding, taking that approach this year would result in a dividend well below $1,000.
That idea is unpopular among legislators, who are instead considering alternatives. One is the CBR, but because it requires a supermajority in the House and the Senate, it’s procedurally difficult. As few as six senators or 11 House members could block the draw from savings.
Overspending from the Alaska Permanent Fund is possible with a simple majority vote of the House and Senate, but that would reduce the amount of money available from the fund in the future and create significant uncertainty that likely would harm the state’s debt rating.
Some legislators, particularly in the Senate, are proposing tax hikes to address the situation. In late March, the Senate Resources Committee advanced a bill that would change the way the state’s corporate income tax applies to the oil company Hilcorp. That’s expected to generate as much as $150 million per year.
That bill, Senate Bill 92, is scheduled for a hearing Wednesday in Senate Finance.
The Senate Resources Committee is also considering a broader change to oil taxes that involves reducing a tax credit awarded to companies at certain oil prices on each barrel of oil. That change is in Senate Bill 112, which was heard Friday by the resources committee but doesn’t have another hearing on the calendar.
Enacting that bill is expected to generate as much as $190 million for state services or the dividend in the coming fiscal year.
The Senate Finance Committee is also considering a change to taxes on internet sales, but that’s not considered a substantial change.
The state House has yet to seriously consider any tax increases, and Gov. Mike Dunleavy has previously said that he strongly opposes any tax increases, which has hampered the drive to balance the budget by raising taxes.
Alaska Beacon is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
April 9, 2025 Seward Folly Staff Update:
According to a recent opinion piece (Alaska has an education crisis…ADN April 9) Hb 69, heading to the House Finance Committee, includes provisions that establish state expectations for class sizes, enhances career and technical education in schools, and provides support for charter schools. It also includes more accountability for home school students. More than 90% of students in neighborhood schools take state assessments, but less than 15 % of public correspondence students are similarly assessed.
According to Seward’s Parent Teacher Organization’s president Ben Bohart, the district is facing a 17 million dollar deficit, and even if the Base Student Allocation were raised by $1000 the following actions may occur:
- 50% cut to distance education salaries
- Elimination of all elementary school counselors
- Elimination of the Quest employees
- Reduction of workday hours for our pool, putting our pool manager’s position at risk
- Reduction of workday hours for our theater, putting our theater technician’s position at risk
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