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Alaska Senate passes budget including $1,000 PFD, despite warnings of upcoming financial challenges.

Alaska Senate Approves Budget Amidst Financial Challenges

On Wednesday, the Alaska Senate passed its version of the state budget which includes a $1,000 Permanent Fund dividend and a projected $150 million surplus. However, senators caution that this surplus may quickly dissipate, predicting even tougher decisions ahead for the next fiscal year.

Sen. Lyman Hoffman (D-Bethel), co-chair of the Senate Finance Committee, stressed the importance of preserving the state’s $2.8 billion Constitutional Budget Reserve to weather impending financial storms. The Senate budget is $350 million less than the House version and significantly lower than Gov. Mike Dunleavy’s $1.7 billion proposal.

Concerns over decreasing oil prices have emerged as a major challenge. Alaska North Slope crude is currently priced at $65.63 per barrel, falling short of the anticipated $68. The federal Energy Information Administration forecasts further declines, compounded by global economic slowdowns and increased OPEC production.

Federal funding, which constitutes over $6 billion of Alaska’s budget, is also at risk. Hoffman indicated that even a modest 5% cut could lead to a $300 million shortfall.

The debate over the size of the Permanent Fund dividend revealed divergence among senators. The proposed $1,000 dividend represents the lowest inflation-adjusted amount in history. Although attempts were made to raise it, including a failed amendment to $1,500, lawmakers acknowledged the current fiscal constraints.

Calls for a long-term fiscal plan and better revenue management were common, with suggestions to expand oil taxes and reassess government spending. The budget passed with a 16-4 vote and now moves back to the House, where a straightforward vote is anticipated, potentially leading to a conference committee for negotiations as the May 21 deadline approaches.

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Photo credit alaskapublic.org

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