The Alaska Senate Finance Committee received a three‑year budget outlook from Legislative Fiscal Analyst Alexi Painter, who warned the committee that under status‑quo assumptions the state faces multi‑year deficits that likely require either spending reductions or new revenues.

Painter outlined the revenue picture and short‑term drivers. The fiscal picture reflects a rising Percent‑of‑Market‑Value (POMV) draw from the Permanent Fund between FY 2025 and FY 2027 and oil‑based traditional revenue driven by price and North Slope production. Painter noted that Department of Revenue oil‑price forecasts were tracking futures markets but that alternative forecasts (U.S. Energy Information Administration) showed lower oil prices, which would materially reduce state revenue because each dollar change in oil price affects Alaska revenue by about $35–40 million.

Painter highlighted several major cost drivers: increasing Medicaid spending (projected to be roughly 22% higher in FY 2026 than FY 2023 on the governor’s schedule), expanded K‑12 funding proposals and demographic shifts in student counts (a statewide decline in brick‑and‑mortar students offset by large gains in correspondence enrollment), and a cumulative deferred maintenance backlog now reported at about $2.4 billion. He said the University of Alaska accounts for roughly $1.5 billion of the deferred‑maintenance total and that estimates for other agencies rose as facility assessments were updated.

Painter provided a status‑quo scenario the committee requested: after subtracting the governor’s operating budget and transfers, and adding placeholders for Medicaid, negotiated labor contract renewals, a $680 million BSA equivalency measure, targeted community assistance, childcare, and additional capital/deferred‑maintenance funding, the model produced a deficit of about $347,000,000 for FY 2026; including a $50,000,000 supplemental placeholder brings the scenario to roughly a $397,000,000 deficit. Combining the FY 2025 deficit (about $139,000,000 in the scenario) and the FY 2026 gap would yield roughly $536,000,000 of budget shortfalls across the two years under the assumptions used.

Painter called attention to particular federal funding uncertainties: the Marine Highway System relies on roughly $76.5 million in IIJA (Infrastructure Investment and Jobs Act) authority that phases out after FY 2027, and possible federal changes to Medicaid matching rates or other federal programs could add hundreds of millions of general‑fund exposure. He also noted uncertainty in long‑term pension amortization, school debt reimbursement resumption, and the timing and amount of federal grants for energy and transportation projects.

Committee members asked clarifying questions about student counts, special education multipliers, the magnitude of the state’s pension past‑service liability, and the impact of deferred maintenance. Painter said the Department of Education had issued a request for proposals to study the rise in special‑education intensive counts. Senators emphasized the fiscal magnitude and the need for the legislature to address both the FY 2025 supplementals and the FY 2026 budget.

Painter recommended that the committee consider a mix of approaches—expenditure adjustments, revenue options, and careful use of one‑time funds—and emphasized that using the Permanent Fund earnings reserve or Constitutional Budget Reserve for ongoing spending would be fiscally unsound. He described the figures on screen as illustrative and said his office would update them as forecasts and supplemental requests evolve.