Christmas is just over two weeks away! 2026 will be here before we know it. The Alaska Republican Party met and decided on names to send to Governor Mike Dunleavy (R – Alaska) to fill the two vacant Mat-Su Valley House seats. Senator Lisa Murkowski (R – Alaska) held her annual holiday lunch in Anchorage this week at the Marriott and took questions from the media after. Governor Dunleavy’s proposed FY2027 budget is due by December 15. And the Anchorage Assembly heard public testimony on Mayor Suzanne LaFrance’s proposed sales tax. 

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Lower oil prices could compound deficit issues

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.

Outside of a spike in late-July, oil prices have continued a downwards trend since the start of the fiscal year. The official projection released last spring was $68 per barrel and, as of Dec. 2, price has averaged just over that level year to date. If prices continue to hold at the current level, in the mid-60s, we can expect an average very close to the unofficial forecast released by the Department of Revenue in June. That forecast projected a downward revenue adjustment of $220 million from the spring forecast. The budget as passed had a projected surplus of $130 million. The revenue downturn could result in a current year deficit of $90 million.

Our September edition detailed roughly $190 million in potential supplemental needs, some guaranteed and others speculative, for FY2026. Since then, the Gov. Mike Dunleavy (R-AK) has released another fire declaration requiring an additional $25 million in spending on fire suppression. This brings the estimated supplemental need to $215 million. This leaves a potential $305 million hole in the FY2026 budget.

FY2027 Budget

Looking forward to FY2027, Gov. Dunleavy continues to face the same fiscal imbalance that has plagued the last seven years of his administration. The FY2027 Budget and 10-Year plan, due by Monday Dec. 15, are his last opportunity to put forward a meaningful solution to these challenges.

There are a few factors working in his favor this year. The percent of market value (POMV) transfer for FY2027 will be $4.0 billion, a $200 million increase from FY2026. Additionally, the statutory Permanent Fund Dividend (PFD) for FY2027, the Governor’s political white whale, is projected to cost $2.3 billion, $200 million less than the PFD included in his FY2026 budget proposal. That’s likely where the good news ends though.

Official revenue forecasts will be released alongside the budget. The forecast price will be based on a rolling average of the futures market this week. That could put the official oil price forecast in the low $60s or high $50s. This would put total projected revenue around $6 billion.

There is also significant pressure Dunleavy will face on the spending side. His budget vetoes significantly short-funded highway maintenance and wildfire suppression; by $62 million and $55 million, respectively. On top of that the actuarial rates for the state’s retirement system, approved by the Alaska Retirement Management Board, could add $75 million UGF to the state budget. That’s almost $200 million in budget increases before addressing cost shifts to the state from recent changes at the federal level.

Dunleavy has shied away from significant fiscal policy in the last few years; if he continues that trend (and includes a full statutory divined for FY2027) we should expect him to deliver the Legislature a budget with a deficit in the range of $1.5 to $2 billion for FY2026 and FY2027. That’s roughly 50% to 60% of the $3.2 billion left in the Constitutional Budget Reserve (CBR).

We expect Dunleavy to release his proposed FY2027 budget on either Friday Dec. 12 or Monday Dec. 15. We will have a comprehensive breakdown of his proposed budget in a special edition of the Political Report after it is released.

Vacant Mat-Su House seats 

Republicans in Districts 26 and 29 met today to decide on names to send to Governor Dunleavy to fill the vacant House seats left by now-Senators Cathy Tilton (R – Wasilla) and George Rauscher (R – Sutton). You can see the names below. Dunleavy is not required to pick from the names sent to him.

For Rauscher’s vacant seat, he is supporting Garret Nelson. Interestingly, former Representative Jesse Sumner was one of the people who applied for Rauscher’s vacant seat, but his name was not moved forward. It will be interesting to see if Sumner decides to run for the House seat, or possibly even challenge Rauscher.   

For Tilton’s vacant seat, she is staying out of it. Steve St. Clair previously worked for her a a legislative staffer. 

Whoever Dunleavy chooses to fill the vacant seats needs to be confirmed by a majority of House Republicans. Who he chooses with the ongoing drama within the Republican House minority will be interesting. Will he choose candidates aligned with Representative DeLena Johnson’s (R – Palmer) more moderate GOP faction, or Representative Kevin McCabe’s (R – Big Lake) more conservative group? 

Johnson’s faction already has enough votes to keep her as minority leader — and, by extension, the votes to confirm — or reject — whomever Dunleavy appoints to the seats. McCabe’s faction, which is closely aligned with Dunleavy, has five members. If the governor’s appointees are aligned with McCabe, he would gain two more votes.  

It’s unlikely Republicans would reject anyone Dunleavy chooses to fill the seats, as it would create even more political drama for Republicans. But if he chooses people who are unhappy with how Johnson was elected minority leader, things could get even more fractious within the Republican House minority. 

McCabe said he is considering resigning from the minority over the issue. If McCabe and just one other person were to leave the minority, their numbers would fall to 17 from 19 — meaning that, according to House rules, the remaining Johnson-led minority would lose one of its seats on seven-member committees that include state affairs, education, and judiciary. If just one member leaves the minority, it would lose a seat on the finance committee. 

But it’s unlikely one member would leave. If there is an exodus, it would likely be by the entire McCabe faction or no one at all.

Things are sure to get very loose when the committee on committees meets after session starts. Thee committee will need to decide who will replace Tilton and Rauscher on their committees, and potentially replace minority members on other committees if the minority loses members. 

Other Happenings 

Alaska Resource Education decided to delete my Facebook comment! Assume it was Beki Touissant herself. How she came to be the new executive director is disgusting. I will no longer be financially supporting ARE, and I know I am not alone. It’s shameful what they did to Ella Ede, the previous executive director. It will be fun to watch the dumpster fire that is sure to come with Beki at the helm.  

The Anchorage Assembly heard hours of public testimony on Tuesday (12/2/2025) on Mayor LaFrance’s proposed 3% sales tax. One of the testifiers was Republican gubernational candidate Treg Taylor, who is against the tax. He then posted his testimony on his campaign Facebook page. It’s so cringy when candidates for public office give public testimony at the Assembly or Legislature then post it on their campaign page. The Assembly voted to continue public testimony to their January 13 meeting. If they pass the sales tax measure, voters would also need to approve it. That question would likely be on the April municipal ballot for Assembly and school board races.  

Senator Murkowski took questions from the media following her annual holiday lunch. She said a short term extension is needed for healthcare tax credits for the exchange, but the bigger issue is the general cost of healthcare. She said she supports strikes on drug boats but feels the mission needs to be clear, and it could be more about regime change in Venezuela than stopping drugs as much of the cocaine on those boats is headed to Europe. And she said President Donald Trump is making it clear that Venezuela President Nicolás Maduro’s time is limited and he may be smart to seek a save haven. There’s been talk he may be looking to bail to Qatar.

This Week’s Loose Unit

This week’s Loose Unit takes us to the Mat-Su Valley. This week’s Loose Unit is the City of Palmer, with a special mention for City Manager Kolby Hickel Zerkel.

The contract for managing the Palmer Golf Course expires on December 31. George Collum has had the contract to operate the golf course for 18 years. Prior to that was the deputy director for seven years. Up until now there has never been an issue with the contract. 

The Palmer Golf Course is popular and makes money for the city. But now that Kolby Hickel Zerkel is the city manager, it appears the contract and the golf course itself are in jeopardy. Since October, the Palmer City Council has been aware the contract expires on December 31. They directed Hickel Zerkel to work to get the contract renewed, but according to her and Mayor Jim Cooper, the directions have been conflicting. She told me they are planning on releasing an RFP for the contract, but it won’t be done before the contract expires. Very loose. And just think about how many people in Alaska are going to respond to an RFP to manage a golf course in Palmer? My guess is not many. By all accounts, the current longtime operator has been doing a great job.  

There is also a narrative being pushed by Cooper and Hickel Zerkel that the Federal Aviation Administration could be responsible for the contract issue. But they have known about that since at least July. There has never been an issue with the FAA and the golf course, until now. It’s interesting that Hickel Zerkel’s husband, Keenan Zerkel, is in the aviation business and her uncle, Roger Hickel, has a whole section on the website of his business, Roger Hickel Contacting, about his work in aviation. Maybe it’s just a coincidence! 

If the contract expires on December 31, there will not be an operator. And if the City of Palmer decides to go the RFP route, that will take several months. A lot of work happens in the winter and spring from getting golf tournaments on the schedule to ordering equipment. The golf course also employs around 50 people during the season. The whole situation is extremely loose. Leave it to government to fuck up a contract that actually makes money. But maybe there is more to the story. Classic Loose Unit behavior. 

The December 16 Palmer City Council meeting is sure to get loose. A lot of people are very pissed off about this maximum loose, and totally avoidable, situation. 

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.