The Alaska Senate Finance Committee received an updated three-year budget outlook Tuesday showing larger projected deficits driven by the spring revenue forecast, governor amendments and newly reported bargaining-unit contracts.

Alexi Painter, the legislative fiscal analyst, told the panel: “Not a whole lot has changed since the last time I was here, but the most significant is the spring revenue forecast.” He said the governor’s supplemental requests and later amendments raised the governor’s FY25 supplemental line to about $91.4 million and, after including supplementals, put the FY25 deficit at roughly $172.5 million. Painter said the deficit before supplementals for FY25 remains about $81.1 million.

The update matters because the increased gaps would draw more heavily on the state’s savings. “We estimate [the constitutional budget reserve]’s about $3,000,000,000 today,” Painter said, and he said following the governor’s budget language would draw more than half of the remaining balance of the fund when accounting for the FY26 deficit as well.

The report summarized several drivers behind the higher deficits: the spring revenue forecast (a downward revision in expected revenue), governor March 13 budget amendments, and newly negotiated or incoming bargaining-unit contracts. Painter said the committee has received three contracts so far — the Alaska Correctional Officers, one university union and Mount Edgecumbe teachers — and that those three added about $16 million to the governor’s “agency operations” cost line. He said another six bargaining-unit contracts remain to be renegotiated this year and that the placeholder used for new contracts (previously based on a 3% estimate tied to the supervisory unit contract) may be too low given the variability seen so far.

Painter walked members through budget scenarios developed for the committee and a modified House finance scenario that uses the House-passed version of House Bill 69 (the education bill). He cautioned that the House-passed HB 69, as amended, raises projected K–12 costs in FY27–FY28 compared with earlier estimates and would add to any deficit if those policy changes were adopted by the Senate. Using the House bill as modeled in the committee documents raised the education cost estimate by roughly $22 million in the years shown.

Under the Senate co-chairs’ scenario (which incorporates the spring revenue forecast and the governor’s March 13 amendments and maintains a set of policy placeholders identified by the co-chairs), Painter said the overall post-transfer deficit in the governor’s budget is about $1.655 billion. He noted that scenario would draw heavily on the constitutional budget reserve and that continuing decisions about PFD policy and other choices will influence longer-term sustainability.

Painter presented a separate balanced-budget scenario based on the House finance co-chair’s earlier work and adjusted to the spring forecast and amended budget. That version produced a different Permanent Fund Dividend (PFD) result: a balanced-budget PFD in that modified House scenario was estimated at about $406.3 million total, or roughly $570 per recipient under the assumptions used in the committee presentation.

Committee members asked about the Permanent Fund POMV draw rate. Senator Cronk asked, “What scenario would these numbers be if we actually lowered it to 4.5 versus the 5 draw?” Painter replied that lowering the draw by half a percentage point would increase the deficit by about $400 million in the short run; he explained the trade-off as a short-term cash-flow loss versus potential long-term asset growth from a smaller payout.

Painter also flagged several recurring placeholder items used in the scenarios: $680 million for the foundation formula increase (K–12), an additional people transportation formula amount roughly equal to last year’s increase, $30 million for community assistance distributions, $10 million for childcare, a fire suppression and disaster relief placeholder near average annual usage, a backstop for the Alaska Marine Highway System, a $350 million capital budget, and $20 million for miscellaneous additions. He said a long-standing $50 million placeholder for future supplementals may be understated this year given the supplementals already identified (~$90 million in the current presentation).

On the multi-year outlook, Painter said the combined FY25–FY26 shortfall the legislature faces under the co-chairs’ scenario is about $677 million, with FY27 and FY28 deficits remaining sizable (FY28 was presented as roughly $728 million under the modeled assumptions), driven in part by slower revenue growth and projected lower oil prices in that year.

No formal committee action or votes were taken in the meeting. Committee leadership said staff would continue working with the other body to address FY25 and move on FY26 deliberations in the coming weeks.

Looking ahead, Painter and committee members emphasized that final outcomes depend on policy choices (including any adoption of HB 69 provisions), the remaining bargaining-unit agreements, developments in the spring revenue forecast, and the committee’s decisions on what to fund from savings versus recurring revenues.