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New budget report predicts state savings accounts will be empty by 2021

ANCHORAGE (KTUU) — In a warning to legislators, the nonpartisan Legislative Finance Division says the state’s budget battles don’t appear to be over.

In a 10-page report, David Teal, Director of Legislative Finance, says the same level of state services this year will cost $200 million more next year.

And that doesn’t count Permanent Fund Dividends.

State spending has been one of the most contentious issues in the Legislature, with arguments over the budget inside each caucus, between the majority and minority caucuses in the House and Senate, and between the House and the Senate themselves. The budget — and how to pay for Permanent Fund Dividends — is looming as a major issue in the Alaska governor’s race too.

How the dividend will be calculated is liable to be “the primary issue of the 2019 legislative session,” Teal said in the report.

“The document sort of points out the fake budgeting that goes on during campaign cycles,” said Rep. Les Gara, D-Anchorage, a long-time member of the House Finance Committee who is retiring this year.

Eagle River Republican Anna MacKinnon, a retiring co-chair of the Senate Finance Committee, referred questions to the other co-chairman, Bethel Democrat Lyman Hoffman. An aide said Hoffman was on personal leave and unavailable.

Teal’s report, an assessment of next year’s impacts from decisions made by the Legislature this year, was released last month. It was reported first in a blog post by journalist Dermot Cole of Fairbanks.

In the report, Teal says the Legislature produced a reduced budget last session by only paying 75 percent of the annual cost of new state prosecutor and trooper positions. While recruiting for those slots meant the full amount wasn’t needed, the “preferred” practice is to budget for the full amount, then reduce it in a supplemental budget during the fiscal year, Teal said.

Fully funding those positions will appear to be a budget increase next year.

Far more money — about $100 million — was shorted for Medicaid, the report said.

In the 2018 budget, Gov. Bill Walker requested a Medicaid budget of $580 million, “which was $45 million less than projected costs.” The Legislature further reduced the amount by $16 million, Teal noted, leaving the program short some $61 million.

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