Senate buckles down on state budget as Legislature’s adjournment approaches | Local News Stories

Things seemed quiet in the state capitol last week despite the Legislature’s adjournment just days away. It may be a lull before the storm, though.

After several days of delay, the Senate Finance Committee formally adopted the versions the state operating and mental health budgets in House Bills 69 and 72 passed days earlier by the state House.

The senate had worked out its own version of the budgets earlier. Incorporating them into the House bills was a procedural formality, although some changes were made Thursday.

It largely set the stage for the heavy lifting yet to be done before the required May 19 adjournment, however.

One bit of good news is that improving oil prices and steady oil production will see more revenue coming to the state treasury this year and next, the Legislative Finance Division told the Senate Finance Committee May 12.

Based on an assumed average oil price of $53 per barrel in Fiscal Year 2021, the current budget year, and a $61 per barrel average price in FY 2022, the budget year starting July 1, there will be an additional $331.7 million in the current year and an added $459.6 million next year, the legislators were told.

While things seemed quiet in the state capitol hallways there were intense back-room discussions underway on big issues yet to be resolved including how to incorporate several hundred million dollars in new federal pandemic-aid money into the budget.

There’s also the Permanent Fund Dividend. How big it should be and how to pay for it are unresolved. Basically, the state budget balances, meaning revenues will generally match expense, without a PFD.

If a large dividend is decided on, the Legislature will have to take money from Permanent Fund earnings on top of the $3 billion in Fund income already allocated to support the budget.

Meanwhile, legislative leaders have about $500 million in federal money available this year. Just over $1 billion was allocated to state government in the American Rescue Plan Act passed by Congress but U.S. Treasury guidance issued May 10 said this will come in two increments, half this year and half next year.

But even with $500 million available rather than $1 billion legislative leaders may decide to phase even that money over two years, so not all decisions need to be made by May 19. A special session of the Legislature is also likely later this year to take up Gov. Mike Dunleavy’s proposals for a constitutional amendment on the Permanent Fund and the PFD.

The governor proposed late changes to his constitutional amendments last Thursday, surprising many. The plan would wrap Dunleavy’s current proposal for a statute change for a 50-50 split of Permanent Fund earnings between the dividend and an allocation to the budget into his proposal for an amendment to the Constitution that would include the dividend.

On other matters, the Legislature is close to passing a bill that would facilitate expansion of industrial hemp growing. Hemp is a fast-growing crop suited to northern climates which has many applications in manufacturing including food and wellness products and biomass. The bill, sponsored by Senate Majority Leader Sen. Shelley Hughes, R-Mat-su, would bring Alaska’s infant hemp industry, now at a pilot stage, into compliance with the 2018 federal farm bill, setting the stage for growth.

The Senate has passed Hughes’ bill to the House. Meanwhile, a similar House bill is at an advanced stage of passage in the that body, which increases the likelihood that one or the other bill will pass by next Wednesday night.

Another proposal at an advanced stage in the Legislature is an initiative by the governor to establish a financing unit within the Alaska Industrial Development and Export Authority, or AIDEA, to do financing for a wide range of “sustainable” energy projects.

The idea is for AIDEA, the state development finance corporation, to partner with commercial banks and other entities to jointly finance projects. The concept is modeled on so-called “green banks” that have been successful in other states.

Chris Rose, a resident of Sutton, north of Palmer, worked with the governor in putting the energy program financing plan together. Rose is executive director of the Renewable Energy Alaska Project, or REAP, which promotes alternative energy and energy conservation.

While many types of energy projects could be financed under the legislation the intent is mainly to help homeowners and commercial building owners do smaller-scale renewable energy and energy conservation projects, through weatherization.

However, other kinds of initiatives including “decarbonization” projects that reduce carbon released in emissions, could fit under the program, AIDEA officials told legislative committees.

The details of what will be financed and how a program might work will be worked out by a technical advisory committee to AIDEA. The authority has a long history of success in partnering with commercial banks in a commercial business loan program.

Similar House and Senate versions for the energy plan are in the respective Finance committees in both bodies, so it’s quite possible that one could move to the other body in the next few days, and on to final passage by May 19.

But even if the bill doesn’t quite make it by next Wednesday the proposal is well positioned to be passed next year.