The special session of Legislature ended in Juneau Thursday after the state House voted 26 to 14 to accept a compromise operating and capital budget developed developed in negotiations with the Senate.
The two bodies agreed add $31.4 million to House Bill 39, the budget bill, to facilitate the deal.
In a significant concession the House agreed to a $1,300 Permanent Fund Dividend, or PFD, about half the $2,700 dividend the Republican-controlled House had been pushing for.
“As a result of long discussions and compromise, the Senate and House agreed to $32.4 million in additional expenditures,” Senate Majority Leader Sen. Cathy Giessel, R_Anch. said.
“The expenditures are spread over the state, from small communities to large,” she said. This still leaves a projected remaining surplus of $34 Million in the Fiscal Year 2024 budget.
The House and Senate had been deadlocked in budget talks the previous day, Wednesday, May 17, the 121st day of the regular 2023 session and the mandatory adjournment date set in the state Constitution.
When both bodies adjourned Wednesday without reaching an agreement Gov. Mike Dunleavy issued the call for a special session that started Thursday morning.
Legislative leaders from both houses spent much of the day negotiating the compromise.
There had been differences between the operating budgets passed earlier by the House and a version of that bill, House Bill 39, developed in the Senate, but most of these were resolved in amendments made in the Senate Finance Committee, said Sen. Bert Stedman, R-Sitka, cochair of the Senate Finance Committee.
Negotiations continued Thursday on more changes House members wanted and an agreement on those war reached in the afternoon.
The major difference between the House and Senate had been the Permanent Fund Dividend, or PFD. The House wanted that at $2,700, which would have created a $600 million to $800 million deficit. The Senate favored a more modest $1,300 dividend which would leave a small surplus.
In a Wednesday evening briefing Stedman said there are were few options for paying for a deficit that large, so that the bigger dividend could be paid.
One is to take money from state savings in the Constitutional Budget Reserve, which now has about $2.4 billion. However, the Legislature’s finance division has advised that this would draw the reserve fund below what is needed for possible emergencies, Stedman said.
Another is to take an extra draw from Permanent Fund earnings beyond the $3.5 billion the Fund now pays for state budget support. However, the Fund’s earnings are already under stress because of poor conditions in the stock market, Stedman said.
To take an extra draw could hamper the Fund’s ability to make the annual payment to the state, including for the PFD, if poor stock market conditions continue, he said.
The final, third option is to raise new revenues, which could be done through a personal income tax, a state sales tax or raising taxes on the oil and gas industry. There is no widespread support in the Legislature for any of those, most legislators say.
