JUNEAU, Alaska (KTUU) — After two days of marathon amendment hearings, the House Finance Committee has passed its version of the operating budget with around $257 million in proposed cuts now headed to the floor for further debate and amendments from the full House.
The House Finance Committee’s version of the operating budget would includes cuts to Medicaid, the University of Alaska, and the Alaska Marine Highway System. The budget also proposes to stop sending money to municipal governments for school construction costs.
“It’s a very significant cut but at the same time, we’re trying to keep core services and things Alaskans have asked for,” said Rep. Neal Foster, D-Nome, the co-chair of the House Finance Committee.
While the cuts may be “significant” compared to last year’s budget, the proposed reductions are much smaller than the $1 billion-plus cuts requested by Gov. Mike Dunleavy. The governor has repeatedly signaled that he wants a balanced budget this year, and that he will use his line-item veto power to achieve his goal if necessary.
To fill the remaining deficit, the House Majority appears poised to deliver a reduced Permanent Fund Dividend in line with testimony lawmakers say they received while traveling across the state.
“A lot of Alaskans have said, ‘We’re okay with a smaller PFD if it means that our schools are going to be funded and our potholes are going to be filled and our public safety intact,’” Foster said.
Rumors abound across the Capitol Building of a dividend between $1,000 and $1,600.
The measure of reducing the amount of the dividend to avoid deeper cuts to state services was approved by the Legislature in 2017 and 2018, but the methodology wasn’t supported by all members of the current House Finance Committee.
“Using the PFD to grow state revenue will not grow our economy,” said Rep. Ben Carpenter, R-Nikiski during debate. “It’s not sending a message of fiscal responsibility, quite the opposite, it will communicate that we have no intent to take an appetite suppressant.”
Rep. Lance Pruitt, R-Anchorage, said that feelings in the House Minority caucus were mixed, with some who want to deliver a full dividend and others who want to see a “step-down” in the payment size.
With the House Minority having four members on the House Finance Committee compared to seven for the majority, a pattern emerged during debate: the House Majority proposed cuts before the House Minority sought deeper reductions in line with those proposed by the governor.
None of the House Minority’s proposals for deeper cuts to major spending areas were approved by committee votes.
Pruitt doesn’t sit on the House Finance Committee, but he watched closely throughout the two days of debates on amendments. He said he was appreciative of the reductions that were adopted but, “We’re challenged, and not really getting to the point that’s necessary at this time.”
The full House of Representatives is expected to begin hearing amendments to the budget on Wednesday with hopes to pass the bill to the Senate before the end of the week.
The House Finance Committee voted Thursday to approve spending reductions of $58 million to Medicaid.
The cuts are “unallocated,” as described by committee vice-chair Rep. Jennifer Johnston, R-Anchorage, meaning the decisions about where the reductions in spending would come from are to be made by the department itself rather than the Legislature.
Department of Health and Social Services Commissioner Adam Crum released the administration’s proposed “Phase 1” reductions to Medicaid in March that totaled $95 million.
A presentation by DHSS to a House Finance subcommittee said Medicaid could withstand a $103 million cut. Johnston feared that bigger reductions to the Medicaid budget would result in underfunding the service and the need to pass a supplemental budget to pick up the shortfall.
The cuts would not see a rise in rates and adult preventative dental care would still be included.
The House Finance Committee also voted to eliminate Medicaid-funded elective abortions, which would save the state around $334,000 annually.
The University of Alaska System
The House Finance Committee approved $20 million in spending reductions to the University of Alaska — well short of the $134 million cut proposed by the governor.
In the subcommittee process, $10 million in spending was added to the UA budget, meaning a net reduction of $10 million if passed.
The Alaska Marine Highway System
A $10 million cut to the Alaska Marine Highway System budget was approved, again falling far short of the $97 million reduction proposed by the governor.
Deeper cuts were proposed by members of the House Minority caucus, but Rep. Dan Ortiz, I-Ketchikan, argued passionately in support of ferries, saying they were vital to connecting Southeast communities.
School Bond Debt Reimbursement
The House Finance Committee approved a measure that would end school bond debt reimbursement from the state.
The measure would save around $100 million in FY2020 but the Alaska Municipal League says the burden would be simply shifted to local governments and property taxes.