The Senate concluded its budget subcommittee process last week, making deeper cuts than the House to Medicaid and the Alaska Marine Highway System (AMHS), but smaller cuts to the University of Alaska.

On Monday, April 22, Senate Finance adopted a committee substitute to the budget as approved by the House.  It would cut spending from FY 2019 levels by $281 million in unrestricted general funds (UGF), $24 million more than the House. 

The CS includes the recommendations of the Senate budget subcommittees.  Those recommendations total $82 million less in agency operations spending than the House.

Whereas the House cut AMHS by $10 million in unrestricted general funds (UGF), the Senate Department of Transportation & Public Facilities (DOT) subcommittee is proposing to cut AMHS by $44 million, including $40 million UGF.

Senate Finance Co-chair and DOT subcommittee Chair Bert Stedman (R-Sitka) said the cut to AMHS is a compromise.  Gov. Mike Dunleavy’s proposed $98 million cut to AMHS would have ended ferry service September 30.

“The budget that was submitted would have tied up all the ships on October 1.  This would allow the Marine Highway to run a lower scheduled service throughout the system — pretty much throughout the system — from October through June,” Stedman said during budget closeout.  “Certainly, a reduced service is better than no service.”

“So we can assure them that they are not forgotten and they will have service, even though it may be reduced?” Sen. Donny Olson (D-Golovin) asked of coastal communities.

“Yes,” Stedman replied.  “Senator Stedman did not turn into the Benedict Arnold of the Marine Highway.”

The DOT subcommittee did not explicitly direct the ferry schedule, so the cut, if it survives the budget process, would likely halt winter service to Prince Rupert, British Columbia, according to DOT budget scenarios.

The subcommittee did not match the House’s five-percent reduction to regional highways that House Finance Co-chair Tammie Wilson (R-North Pole) put forward as a demonstration that AMHS is not solely bearing the burden of budget reductions.

Senate members also suggested over $6 million in fund source changes that shift money from UGF to designated general funds (DGF), moves that reduce the deficit but may not be repeatable next year.  Therefore, it’s debatable whether those are true budget cuts.

The Department of Health & Social Services (DHSS) subcommittee, chaired by Senate Finance Co-chair Natasha von Imhof (R-Anchorage), recommended an $83 million reduction to Medicaid.

Dunleavy recommended a total cut to Medicaid of $249 million, though DHSS officials acknowledged that the best they could do in FY 2020 was a $102 million reduction, including elimination of the preventative Adult Dental Medicaid Benefit.

House Health & Social Services Co-chairs Ivy Spohnholz (D-Anchorage) and Tiffany Zulkosky (D-Bethel) felt a reduction beyond $58 million would negatively impact services.  That is the amount reflected in the House budget.

Both the House and the Senate DHSS subcommittee are encouraging DHSS to maintain the Adult Dental Medicaid Benefit.

The DHSS subcommittee did accept Dunleavy’s $15 million cut to adult public assistance, elimination of the Nome Youth Detention Facility, and a $2 million cut to public health nursing.

While the House increased Dunleavy’s proposed payment assistance grants by $10 million for Alaska Pioneer Homes residents, the Senate subcommittee only increased the amount by $5 million.

Dunleavy is seeking to double Pioneer Homes rates.

All differences between the House and Senate versions of the budget will need to be reconciled by a conference committee.  The conference committee’s report will then receive an up-or-down vote in both chambers.

CS Has Smaller Cut to University, Fully Funds School Construction

In contrast to DOT and DHSS, the Senate subcommittee was gentler than the House with the University.  The House budget cuts UA by $10 million, while the Senate subcommittee recommended a $5 million cut.

The Senate subcommittee also recommended splitting UA into two separate budget appropriations.  One would fund the University of Alaska Fairbanks (UAF) and the University of Alaska Anchorage (UAA).  The other would fund the University of Alaska Southeast (UAS) and community campuses.

Unlike the House, the Senate CS does not forward-fund FY 2021 K-12 public education.

However, it matches the House’s move to leave FY 2020 public education funding intact.

Dunleavy proposed a $300 million cut.

Additionally, the Senate CS fully funds school bond debt reimbursement and school construction in the Rural Education Attendance Area (REAA).  The House reduced the funding by 50 percent.

Other FY 2020 education funding essentially matches the House.

A section of the bill dealing with supplemental FY 2019 spending reappropriates $1.2 million from the Alaska state libraries for use instead on maintenance and operations of the Mt. Edgecumbe Aquatic Center.

Dunleavy sought to defund the Center.

CS Keeps Ocean Rangers, But Doesn’t Match House Moves on Public Safety

In the Department of Administration (DOA), the Senate subcommittee proposed a five-percent cut to public radio and a seven-percent cut to public television.  The House kept public broadcasting whole.

Subcommittees did not match a House floor amendment adding $800,000 each to the Public Defender Agency and the Criminal Division of the Department of Law.

However, the Law subcommittee did move to re-open the office in Utqiagvik and locate two prosecutors there.  It also added paralegals in Bethel, Kenai, and Palmer.

Some of the biggest differences between the House budget and the Senate CS, outside of DOT and DHSS, fall under the Department of Corrections (DOC).

While Wilson orchestrated increased spending on electronic monitoring and halfway houses to avoid Dunleavy’s plan to ship inmates Outside, the Senate DOC subcommittee accepted Dunleavy’s concept.  The subcommittee recommended a $23 million unallocated cut to DOC as part of the inmate transfer, but included intent language encouraging DOC to only ship out 100 inmates, rather than Dunleavy’s 500.

The Department of Public Safety (DPS) subcommittee cut Village Public Safety Officers (VPSOs) by $1.5 million, half of Dunleavy’s cut.  It added a one-time shift of $250,000 from VPSOs to the Council on Domestic Violence and Sexual Assault (CDVSA).

The House had kept VPSOs whole.

The Senate subcommittee also did not match the House’s $500,000 cut to the Alaska State Troopers, designed to keep FY 2020 DPS funding in line with FY 2019.

Ocean Rangers, cruise ship pollution monitors targeted for elimination in both the Dunleavy and House budgets, are recommended for preservation by the Senate Department of Environmental Conservation (DEC) subcommittee.  The program is fully funded through cruise ship passenger fees.

Other Differences From House Include Oil and Gas Tax Credits

Beyond public safety, the Senate subcommittee for the Department of Commerce, Community, & Economic Development (DCCED) did not match the House’s shift of $450,000 from the Alaska Gasline Development Corporation (AGDC) executive director’s salary to the Alaska Legal Services Corporation, thereby adopting Dunleavy’s proposed elimination of ALSC grants.

ALSC provides pro bono legal services for underprivileged Alaskans.

Senate subcommittees accepted Dunleavy’s plan to transfer economic development responsibilities from DCCED to the Office of the Governor, as well his transfer of the heads of the divisions of Habitat and Subsistence Research from the Department of Fish & Game (DFG) to the Office of Management and Budget (OMB).  OMB also resides within the Office of the Governor.

Unlike the House, the Senate subcommittee for the Department of Natural Resources (DNR) preserved the Agricultural Revolving Loan Fund.  It also proposed only closing the recorder’s office in Palmer, while the House proposed closing the offices in Palmer and Juneau.

Dunleavy suggested closing all recorder’s offices, except in Anchorage.

Other departments either match the House or nearly match it.

There is no appropriation for oil and gas tax credits in the Senate CS.  The House version included $70 million of Alaska Industrial Development and Export Authority (AIDEA) receipts for the credits.

Pete Ecklund, Stedman’s aide, said the Dunleavy administration is preparing to bond for the credits instead.

Those hoping for an override of Dunleavy’s likely line-item vetoes are certainly feeling more optimistic after seeing Senate subcommittee recommendations.

While the budget must still undergo amendments in Senate Finance and on the Senate floor, there is much more agreement between the House and Senate than there is between either chamber and the governor.

Senate Finance is scheduled to hear from Legislative Finance Director David Teal on Tuesday and Thursday.

Like the House, the Senate Finance CS does not yet include a Permanent Fund dividend (PFD).  Stedman said Teal will address possible PFD amounts, acknowledging that a $1,600 PFD to match 2018 would result in a deficit.

“It’s definitely a negative number of a few hundred million,” Stedman said in a short hearing.

Senate Finance will consider amendments later this week. They are due by Wednesday at 5pm.

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