With just over two weeks to go before a government shutdown, the Alaska Legislature was able to pass a budget with the bare minimum number of votes necessary, 21 in the House and 11 in the Senate. And this is after it initially failed 10-8 in the Senate earlier today. Senator Lyman Hoffman (D – Bethel) initially voted no, but after a break he moved to rescind action and changed his vote to yes. It was pretty strange. He likely used it as leverage to negotiate for something. One longtime Juneau staffer described it as, “Classic Lyman.”

The House passed the budget last night with 21 votes, but failed to garner the 2/3 vote (27) in order to establish an effective date of July 1, the start of the fiscal year. Article 2, Section 18 of the Alaska Constitution states:

Laws passed by the legislature become effective ninety days after enactment. The legislature may, by concurrence of two-thirds of the membership of each house, provide for another effective date.

Unless the House is able to garner the 27 votes necessary, the budget won’t go into effect until 90 days after it is signed into law. All of the House Republican minority members voted against the effective date clause with the exception of Representatives Bart LeBon (R – Fairbanks) and Steve Thompson (R – Fairbanks). It fell four votes shy of the 27 needed. They could rescind the action on the vote and try again, but that seems unlikely as some House members have already left town.

Members of the Legislature have cited a 1979 legal memo from then-Attorney General Avrum Gross (father of Al Gross) that states the government can expend funds in an appropriation bill before it takes effect. But this has never been tested in court.

Both bodies also failed to reach the 3/4 vote threshold for the reverse sweep and draws from budget reserve funds. The conference committee tied the 3/4 vote to fully funding the $1,100 dividend, as well as several capital projects in the Mat-Su Valley, funding for oil tax credits, and funding for school bond debt reimbursement. Because the 3/4 vote failed, the dividend is currently funded at approximately $525. The Senate originally funded a larger dividend, around $2,300 – what it would be under Governor Mike Dunleavy’s (R – Alaska) the 50/50 plan. But that would have required taking more money out of the earnings reserve of the Permanent Fund than is statutorily allowed, something the House was opposed to.

However, this Legislature is set to meet again in August for another special session that Dunleavy called. Senate President Peter Micciche (R – Soldotna) said he intends to fully fund the $1,100 dividend in August, and eventually a $2,300 dividend that he hopes will come out of a compromise for a comprehensive fiscal plan. Members of the House Majority have echoed this sentiment. Because the budget has been passed, both bodies would just need to reach the 3/4 vote to fund the unfunded appropriations, that includes the dividend. This could be done in August. Because the reverse sweep vote failed, funding for programs like college scholarships, rural energy, Power Cost Equalization, and many more will be swept into the Constitutional Budget Reserve on July 1. This occurred two years ago, creating public outcry. This will be a key issue the Legislature will want to resolve in August.

It is unclear what exactly a comprehensive fiscal plan that could get enough support would look like, but it would likely need to include new revenues, more spending reductions, and a final resolution on the PFD. Dunleavy’s proposed 50/50 constitutional amendment would need a 2/3 vote of each body (27 House, 14 Senate) to pass. It would then need to be approved by a vote of the people. Without an agreement on new revenues, this amendment does not have the votes to pass. Even with new revenues, it will be difficult to garner enough votes.

In a statement this morning, Dunleavy said what the House passed was incomplete, and encouraged legislators to fix it by Friday, the end of the special session.

Last night’s floor votes on the upcoming budget resulted in a spending plan that is incomplete and creates uncertainty for Alaskans statewide. There is adequate time to fix this. I am urging both bodies to reengage on the budget and craft a solution, including all the necessary components, that can pass both the House and Senate before end of the special session Friday, June 18, the end of the special session. Failure to complete its constitutional duty could result in a detriment to state services and programs that Alaskans expect and deserve. I like many Alaskans want to see this issue resolved.

This is either in reference to the failure to pass an effective date of July 1 or the failure to approve the 3/4 vote, ot both. Interestingly, yesterday an advocacy group, Restore the PFD, that is run by Dunleavy’s communications team (yes, this is odd) sent out an email encouraging people to tell their legislators to vote no on the budget. However, it was later revealed to have been accidentally sent out. I’m not sure why it was even written in the first place…

The biggest takeaway from today’s vote is the utter dysfunction in the Senate Majority. Senator Shelley Hughes (R – Palmer), the majority leader, and Senator Mia Costello (R – Anchorage), the majority whip, both voted against the budget. The majority whip’s job is literally to whip votes to pass bills. I was not able to find an example of a majority leader ever voting against the final passage of the budget. That is really loose. Senator Roger Holland (R – Anchorage), a majority member, also voted no and compared the budget to a “dumpster fire” on the floor. Senators Robb Myers (R – North Pole) and Lora Reinbold (R – Eagle River), majority members, also voted no. The budget only passed because three members of the Democratic minority voted yes.

While the Legislature was able to pass a budget and avoid a government shutdown, there is a potential litigation issue over the effective date and it is not fully funded. The ball is now in Dunleavy’s court. He can decided to sign it as is or make vetoes. Many critical issues remain to be addressed in the August special session.