Senate Finance hears OMB package; updated forecast shows $65.9M FY2026 surplus, $1.142B FY2027 deficit

The Senate Finance Committee received a briefing from the Office of Management and Budget on March 16 on the governor's March 13 amendment packet and an updated revenue forecast that together produce a projected FY2026 surplus of $65,900,000 and a revised FY2027 deficit of about $1,142,000,000.

"My name is Lacy Sanders. I am the director for the Office of Management and Budget," Sanders said, and she told senators the packet incorporates the Department of Revenue's revised spring forecast and includes both operating supplementals and capital reappropriations. "There will be a proposed surplus of $65,900,000 under the governor's proposed amendments as well as the spring forecast," she said, while cautioning that the presentation was a high-level summary and that the packet contains more detailed line items.

Why it matters: the numbers shape lawmakers' choices this session about whether to add one‑time projects or ongoing programs to the budget. Chair Senator Hoffman cautioned against using temporary increases in oil‑related revenue to establish continuing spending, arguing that one‑time revenue should not drive ongoing commitments. "It's difficult to fund items that are ongoing knowing that the dollars that we're going to receive with the higher prices of oil are temporary," Hoffman said.

What OMB presented: Sanders summarized the March 13 packet as containing roughly $18.2 million in unrestricted general funds and $19.1 million across all funding sources for the amendment packet described on the operating slides. She highlighted program items and supplementals that include:

- Corrections: an $8.8 million cost tied to an interest arbitration agreement with the Alaska Correctional Officers Association (ACOA), with $8.6 million described as related to care for Alaska Pioneer Homes and alignment with Department of Family and Community Services funding.

- Health: about $1.4 million requested to continue the senior benefits payment program into FY2027 and a $1.84 million reappropriation tied to assessment capacity work the department had previously funded with one‑time positions.

- Department of Law: a $2.0 million increase proposed for FY2027 to address rising criminal division costs (expert witnesses, travel, lease and operations) and a $1.5 million supplemental for the current year; OMB also flagged a new litigation described in the packet as the "veil lawsuit," for which $4.0 million was requested to cover the volume and retention of evidence files.

- Capital items/reappropriations: OMB said there were no new capital amendments in the March packet but listed reappropriations and requests including a $7.1 million reappropriation to address changes needed for a Medicaid electronic service authorization solution, and a $150,000 airport‑receipts request to install a backup generator in Antioch. OMB noted the governor's proposed budget had included a $70.2 million STIP (State Transportation Improvement Program) allocation in the capital plan.

OMB also reported aggregate supplemental totals through March 13 of $227.4 million on one slide and said when a $129.6 million transfer for the higher education investment fund is accounted for the total supplemental requests equal $426.8 million; committee materials compared that to HB 289's $373.5 million figure.

Committee questions and process issues: Senator Stedman sought confirmation of the surplus/deficit figures and asked whether the administration planned to submit recommended capital items for FY2027, citing maintenance needs for K‑12 schools, the university and courts. Sanders said the administration currently had no plan to submit additional amendments for those broader capital items but expected a future package tied to the STIP and airport improvement allocations. Senators discussed the process for prioritizing school maintenance projects — some committee members said testimony placed the statutory priority‑list process under strain and they have asked the education commissioner to propose an alternative list; Sanders agreed to review and provide information back to the committee but said changes to statutory process would require statutory or regulatory action.

Next steps: the committee had no votes at this meeting; members will continue budget work as amendments are refined. Chair Hoffman closed the session and said the committee will meet the next morning at 9 a.m.; he previewed three bills on the following agenda: SB 164 (eliminate tax discounts), SB 55 (TIRS/PERS counter rates), and SJR 29 (constitutional amendment for education funding).

The meeting record shows OMB provided additional written backup in the committee packet for members to review; senators pressed for timing of STIP information and for more detailed lists of maintenance projects before the April amendment deadline.