Alaska Senate votes on state budget, with $1,000 PFD

By Anna Lionas

The Alaska Legislature is working to finalize a tight state operating budget for 2026 with just over a week to go until the regular session is scheduled to end on May 21.
The latest version proposes a $1,000 Permanent Fund Dividend, which adjusting for inflation, would be the lowest in history but would still cost the treasury an estimated $635 million, or more than 10 percent of all general fund spending in the budget.
Lower oil revenues and the Legislature’s determination to boost state aid to school districts were cited in putting together this “difficult” budget.
To keep the budget within available revenues, the Senate version of the spending plan includes cuts to early education programs, reduces funding for road maintenance and state prisons.
The House voted down the Senate version last Friday, sending the budget to a bicameral conference committee to negotiate a spending plan that both chambers can accept. 
The House version included a $1,400 PFD but lacked enough revenue to pay for the bigger checks.
Senate leadership has repeatedly said they don’t want to dip into savings to balance the budget, and they would prefer to make cuts to spending, including a smaller PFD than the statutory $3,800.
This point was emphasized again on the Senate floor on May 7 by Sen. Lyman Hoffman (D-Bethel) who said the state’s rainy-day account should be preserved for incoming storms, which could arrive as soon as next year.
Hoffman is a co-chairman of Senate Finance Committee. He believes the state will face strong headwinds in the next few years balancing the budget, outlining several main reasons.

Federal funding cuts
Alaska receives almost $6 billion in federal funding which pays for things like Medicaid, highways, airports, heating assistance and other energy projects, research and some education programs.
“Time will sort out what funds are cut in Washington,” Hoffman said. “If only five percent of the federal revenues are cut to the $6 billion that we receive, that would leave an impact of over $300 million to our budget.”

Oil price volatility
Second, he discussed oil prices being volatile and impactful factors, influencing the state’s revenue and thus the state budget. Hoffman said the Alaska Department of Revenue told Senate Finance co-chairs that oil could drop as low as $64 a barrel on average in 2026. Prices were at $80 on Jan. 15 and $85 a year ago. Every dollar in oil prices for a full year can mean an increase or decrease in $30 million to $40 million to the state treasury. A price of $64 would generate $120 million to $160 million less for the state next year than the department had forecast in its latest revenue report. Hoffman warned prices could drop even lower.

Increased salaries
Third, an increase in state employee salaries following negotiations this year would mean another increase in costs of about $100 million to $150 million over the next few years.
The Senate’s budget version also proposes to use one-time funds totaling over $100 million which won’t be available to plug holes next year.

Headwinds
Federal funding cutbacks, lower oil prices and the lack of any one-time money combined would amount to a shortfall of about three-quarters-of-a-billion dollars next year, Hoffman said. The current operating budget proposal —not including capital projects— totals $5.8 billion, which including the dividend.
“With all of these budget headwinds, it’s clear to me that the decisions next year will be more difficult than the decision we have made today,” Hoffman said.
In the House, many lawmakers were unhappy with the Senate’s cuts, citing early childcare and a bigger PFD as necessary for their constituents.
“What we’re doing by chronically underfunding is we’re growing the number of students, who are unprepared to begin learning,” Alyse Galvin (I-Anchorage) said.
The conference committee will meet to find compromise on the budget. It will be made up of three members each from the House finance and Senate finance committees, with at least one minority member from both.
Once agreed upon and approved by the Legislature, the bill will go to Gov. Mike Dunleavy for his signature.