I hope everyone is enjoying the holiday season. Christmas Eve is just a week away, and session begins in a month. Governor Mike Dunleavy (R – Alaska) released his proposed operating and capital budgets this week. His operating budget, which includes a full dividend (approximately $3,500 per Alaskan), is in the red by a billion dollars. The Legislature is sure to lower that amount as they have done the last six years. Some more legislative races are shaping up to be rematches. And while people are seemingly allowed to drink and use drugs in public, the state felt it necessary to shut down a cigar lounge in Anchorage.

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Gov. Dunleavy releases proposed budget with projected $1 billion deficit

The following is an excerpt from this week’s edition of the Alaska Political Report. You can click here for more information about the Political Report. A subscription is $1,299/year per organization. Discounted pricing is available for non-profits and government entities. Our coverage of the budget starts with the governor’s proposed budget, and we track everything in detail through the entire process. If you have any questions or would like to subscribe, please email jeff@akpoliticalreport.com.

Governor Dunleavy introduced his proposed FY2025 budget and the Fall 2023 Revenue Sources Book, which includes the most current projections of state revenue. Below is a brief summary of today’s release. The Alaska Political Report will provide more detailed summaries in the coming days.

Revenue projections have been adjusted upwards with oil prices. Unrestricted revenue collected in the current year, FY2024, is up approximately $230 million dollars to $6.49 billion. Based on budget language passed last session, that increase will primarily be split between a Constitutional Budget Reserve (CBR) deposit and an energy relief check to be paid with the October 2024 dividend.

Projected FY2025 revenue available for appropriation is estimated to total $6.3 billion, which is effectively the same amount that was anticipated to be available for FY24 at the time the most recent budget was passed. This means that these higher prices won’t translate to greater flexibility in the appropriation process this session.

Gov. Mike Dunleavy’s proposed budget includes $7.3 billion in FY25 spending, an increase of $1.3 billion from the current year enacted budget. This increase is primarily in the PFD; the $2.3 billion full statutory appropriation is $1.4 billion more than the current year. To put this payment in perspective, the transfer is $200 million more than the state anticipates collecting in unrestricted petroleum taxes and royalty.

This sizable increase in the PFD appropriation is coupled with a variety of smaller reductions in the operating and capital budget, framed as status-quo proposals many represent as significant year-over-year funding reductions. Most notable is the removal of outside-the-formula K-12 funding and a significant reduction in the K-12 formula due to student count reductions. These combined factors total a year-over-year drop of $119.5 million in the funding contributed by the state to school districts.

The $21 million Senior Benefit Payment Program is also entirely omitted from the budget, and while the program requires statute to extend its sunset date, no conditional appropriation was included in the language to ensure it is funded within available revenues.

Much of the other reductions shown on the agency comparison reports can be attributed to expirations of one-time appropriations including tourism and seafood marketing, Alaska Gasline Development Corporation (this is replaced with funding in the capital budget), the Office of Public Advocacy and Public Defenders, and workforce training.

Other big movers include an increase in the state’s contribution to the retirement system for municipalities, cities, and school districts of $46 million, a $9 million reduction in debt obligations, and savings from of oil and gas tax credits, which were fully paid off in the current-year budget.

At $305 million, down about $55 million from the current year, the capital budget remains relatively robust by the standards of the last decade. Projects are included across the board to address state agency needs. Outside of the normal projects to match recurring federal programs, there are significant investments in public safety and corrections, university research projects, small amounts included for school construction and maintenance, and a new program at AHFC to assist recent graduates buying homes in the state.

The proposed budget results in a billion-dollar budget deficit. While the Constitutional Budget Reserve currently holds around $2.8 billion, the Office of Management and Budget projects that this level of spending, even with today’s relatively strong oil prices, will exhaust state savings before the end of FY2027 – with no source listed to cover future deficits. Detail of any proposals contemplated by Dunleavy to avoid near-term insolvency were not included in today’s rollout.

On a technical note, for us nerds who like to read the detailed reports, a new reporting category was added by OMB this year. You will now see a column on reports titled “FY2025 Governor Adjusted Base”. This matches terminology used by the Legislative Finance Division (LFD) to differentiate between automatic changes and policy decisions. Its use by LFD helps both in communication of budget changes and managing the finance committee process. The differentiation between what is “automatic” and what is “policy” though can occasionally be subjective, which is generally why it has been purview of the non-partisan LFD. As we look further into Dunleavy’s proposal, it may prove interesting how various actions have been categorized.

The Alaska Political Report will be publishing further analysis on individual state agencies and the capital budget over the next few days.

Neil Steininger, Budget Correspondent

Other Happenings

Republican Steve Menard filed a letter of intent to run against Representative Jesse Sumner (R – Wasilla) this week. Menard, who lost to Sumner last year for the open seat, then worked for Sumner during the legislative session. The day after Menard filed, Sumner filed a letter of intent. This Landmine article goes into more detail. However, Sumner did not indicate an office when he filed his letter. There is some speculation that he may challenge Senator David Wilson (R – Wasilla) instead of running for his House seat.

Republican Jeremy Bynum filed to run against Representative Dan Ortiz (I – Ketchikan) again. Last year, Ortiz defeated Bynum by five points.

There is a Republican state senator in Arkansas named Dan Sullivan. I wonder how many emails he gets that are intended for Senator Dan Sullivan (R – Alaska)?

A bunch of Hamas lunatics showed up to a fundraiser for Representative Mary Peltola (D – Alaska) on Friday night. Approximately 30 of these useful idiots stood outside Williwaw during the event. Witnesses saw several of these wackos chasing Anchorage Assembly member Daniel Volland while he was leaving the event. Word is they plan on making another appearance at Tuesday’s Anchorage Assembly meeting.

The Republican-led House majority held a summit in Anchorage on Thursday and Friday at the Embassy Suites. It’s not exactly clear what they discussed or what came out of it, but I am betting that session will once again provide great content for the Landmine.

Check out this super loose Facebook post from Anchorage Municipal Ombudsman Darrel Hess. I guess if anyone is looking for “penis play cream” they can get it at Target.

This Week’s Loose Unit 

There were several candidates this week. But one really stood out. This week’s Loose Unit is the Alaska Department of Health. This week, the Department of Health shut down a cigar lounge located on Fifth Avenue. I’ve smoked cigars in there before and it’s a great place. Here is part of an email they sent out this week:

We are currently experiencing a shut down necessitated by the State of Alaska Department of Health. This is not related at all to the health or safety of our members but is directly related to the State’s interpretation of the Smoke Free Workplace legislation put through in 2017.

For a private club to allow smoking indoors one stipulation is that we must have been in continuous operation from prior to January 2017 to present day. The Inner Sanctum (the 501C3 that operates The Lounge On 5th) has been in operation and existence since the 1990’s. While the doors were temporarily closed to allow for a full remodel of considerable size and scope, we maintained the original non-profit and tax ID number. We believe this will be but a minor technicality and we should be able to resume operations in short order. Thank you to all our members for your support, and if you would like to help us we have included a couple suggestions below.

The referenced legislation is Senate Bill 63, a bill by then-Senator Peter Micciche that the Legislature overwhelmingly passed and then-Governor Bill Walker signed into law. So the result now is that a cigar lounge is prevented from allowing people to smoke cigars in a cigar bar. It doesn’t get looser than that.

I have personally seen people get drunk and use hard drugs like heroin in public with impunity. This summer I spent a day at the homeless camp on Third and Ingra. It was basically an open air drug market that the police and state officials seemed to have no problem with. But people smoking cigars in a private club is where the state decided they needed to step in. Classic Loose Unit behavior and a real fucking joke. If an elected official ever tells you they support freedom, tell them about this and see what they say.

If you have a nomination for this week’s Loose Unit, or if you have any political news, stories or gossip (or any old pics of politicians or public officials) please email me at jeff@alaskalandmine.com.