OMB director presents governor's March 13 amendments, cites $65.9M FY26 surplus and FY27 shortfall

Lacey Sanders, director of the Office of Management and Budget, told the House Finance Committee on March 16 that the governor's March 13 amendments and the updated spring revenue forecast result in a $65,900,000 surplus for fiscal year 2026 and a fiscal year 2027 deficit of just over $1.1 billion. "The overall surplus is a total of $65,900,000 for fiscal year 20 26," Sanders said during her slide presentation.

The amendments transmitted March 13 total $426,000,000, Sanders said, and include operating and capital supplementals such as an $8.8 million increase tied to the Alaska Correctional Officers Association arbitration award, $5.3 million for payment assistance at the Pioneer Homes, $1.4 million to maintain senior benefits payments, and amendments in the Department of Law to address rising criminal-division case costs. Sanders said the administration also included initial funding related to a new Department of Corrections litigation (identified in testimony as the "Veil" lawsuit) and capital reappropriations for a Medicaid electronic service authorization solution ($7.1 million) and a $150,000 airport-receipts-funded backup generator at Anak Airport.

Committee members pressed Sanders on several unresolved, high-dollar items she described as "on the horizon." Representative Galvin flagged a Department of Education dispute and other contingencies she said could total tens of millions, and asked whether those items are included in OMB's totals. Sanders said the administration had not transmitted those items and "they would not be included in our numbers." On federal receipts, she noted that a rural ferry transportation grant (discussed at about $78 million) would show up as federal revenue, not unrestricted general funds, and that the administration had not transmitted any backstop supplementals to cover a shortfall if the federal funds were not received.

On a separate but related matter, members asked whether HB 289 (the supplemental/appropriations package discussed by the committee) could be carried out under the current revenue forecast. Sanders said, "technically, from a revenue perspective, the bill  HB 289  if it was passed, there would be sufficient revenue based on the revenue forecast that has been provided currently," but emphasized that the governor must still evaluate the fiscal picture at the time he is asked to sign any bill and that OMB would advise him as part of that process.

Sanders described the corrections bargaining cost as covering all budgeted correctional officer positions, with an arbitration schedule that provides a 5% increase effective July 1, 2026, then 2% effective Dec. 31, 2026, and 1% on June 30, 2027. "This ACOA contract's $8,800,000 increase covers the entirety of all of the positions under the Department of Corrections that are correctional officers," she said.

Pam Halloran, assistant commissioner in the Department of Health, said the $7.1 million capital reappropriation supports a Medicaid service-authorization module and staffing to manage a backlog while the department implements a new assessment tool. "We're implementing that tool... the contract initiated in December," Halloran told the committee, explaining the need to keep staff to handle both implementation and backlog work.

Sanders also warned about the disaster relief fund's low unobligated balance and the need to capitalize the fund. She said the administration has allocated funds to specific disasters and that the unobligated balance is "under $1,000,000," meaning the state may need to borrow or otherwise identify resources until the legislature passes a capitalization.

Why it matters: the committee is weighing supplemental appropriations and capital adjustments during an active session. Sanders' presentation framed the administration's view of the fiscal picture while repeatedly cautioning that several large items remain unresolved and that the governor's final decisions on appropriations will depend on the fiscal status at the time bills are transmitted and considered.

Next steps: the committee recessed and transferred the gavel to co-chair Foster; members planned to reconvene at 1:30 p.m. to consider HB 34 (Alaska Innovation Council), HB 91 (marijuana bill) with public testimony, and, time permitting, HB 52 (minors in psychiatric hospitals).