Legislature funded budget at $570 million above Dunleavy request
The Legislative Finance Division, the state Legislature’s non-partisan finance group, is finalizing its reports for actions on the state budget, at least year-to-date. Here are some highlights:

• Total Unrestricted General Fund (UGF) spending for Fiscal 2020, the current budget year, is $4.18 billion. That’s $462.7 million below the $4.643 billion approved for FY 2019, the budget year that ended June 30. This amounts to a 10 percent reduction
• Within the UGF spending total, $3.728 billion was authorized for agency operations for FY 2020, down $258.1 million, or 6.5 percent, from the $3.955 billion authorized for FY 2019. A reduction in state Medicaid authorization accounted for $144 million of this (see note below).
• Also within the UGF spending total, $457.4 million was authorized for “statewide” (non-agency) programs, such as debt service, public employee pension contributions, and oil and gas tax credit payments. This is down $204 million, or 31 percent, from the $657.1 million authorized for FY 2019. However, half of this, approximately $100 million, are payments on past state oil and gas tax credit obligations that were funded in FY 2019 but not in FY 2020. The payments were withheld in FY 2020 in hopes that an alternative plan to pay the approximate $800 million in remaining tax credit liability with state revenue bonds can be developed. Of note is that state debt service and pension payments increased in FY 2020.
• How does the approved FY 2020 total compare with what Gov. Mike Dunleavy requested last spring? The governor’s FY 2020 request totaled $3.59 billion in UGF funds. This is $589.6 million below what the Legislature funded, and the governor ultimately approved. The governor originally talked of $1 billion in reductions to bring the budget in line with expected revenues. In the final outcome the governor appears to have achieved 60 percent of his goal.

A note on Medicaid: The reduction in Medicaid will not be achieved, most likely. Look for a big supplemental budget request for the FY 2020 budget, possibly $50 million or more, next spring. The problem is that Medicaid, a joint state-federal program, has services for recipients (mostly lower income and disadvantaged Alaskans) that are mandated under federal law. The state is attempting to negotiate a waiver to change its obligations, but this will be a lengthy procedure unlikely to be completed in time for any savings in FY 2020.

The only other option for Medicaid savings is to simply stop payments to providers next spring when the Medicaid budget is depleted, unless there is a supplemental appropriation. This course, which the administration attempted last year with payment obligations to school districts, would essentially leave health care providers on the hook for payment for services. Some providers could simply stop taking Medicaid, but this would be difficult for hospitals to do. Laws obligate hospitals to provide emergency services.