On Wednesday, the Alaska Senate unveiled an initial version of the state’s operating budget, which proposes a Permanent Fund dividend of approximately $1,300 for residents, alongside an additional $175 energy relief payment. This year, 25% of the Permanent Fund’s revenue will be allocated to dividends, a significant reduction from the $2,300 dividend approved by the House.

Senate Operating Budget Chair, Senator Bert Stedman of Sitka, emphasized the financial windfall from recent high oil prices but cautioned that these conditions are not permanent. Stedman advocates for a sustainable dividend strategy to prevent financial instability in years when oil prices might falter. He expressed concern over maintaining high dividends only to face years with potentially no payouts.

The larger dividend approved by the House has been criticized by the bipartisan Senate majority, arguing it could jeopardize funding for capital projects and newly approved legislation. Conversely, Governor Mike Dunleavy supports a larger dividend, suggesting the use of the state’s $2.8 billion Constitutional Budget Reserve to boost payouts, particularly given the current economic challenges.

House Speaker Cathy Tilton expressed a desire to maximize the dividend, although she acknowledged the legislative hurdles in accessing the savings account, which requires a three-quarter majority vote in both legislative chambers.

The debate echoes last year’s disagreements over dividend sizes and budget allocations, which concluded with the Senate’s budget being adopted after the addition of $34 million for various projects.

Additionally, the Senate’s proposed budget aims to address a funding shortfall that jeopardizes federal education grants, proposing $11.9 million to compensate two school districts. This follows federal indications that the state had previously underfunded education, a claim disputed by the Dunleavy administration.

The budget also includes a one-time $175 million aid to school districts, increasing per-student funding by $680, mirroring provisions in the House’s budget. Senate leaders aim to finalize the budget by early May, after which it will likely proceed to a conference committee to reconcile differences with the House proposal.

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