Sen. Gary Stevens and Rep. Louise Stutes briefed the Kodiak Island Borough Assembly in a work session Thursday on the state budget outlook, school funding questions and the timetable for Marine Highway vessel replacement.

The presentation matters because Kodiak relies on state capital grants and program distributions for school and facility projects, and lawmakers cautioned the assembly to expect smaller discretionary funds and to plan projects accordingly.

Stevens, a long-serving senator, told the assembly the state faces constrained savings and a difficult budget picture that make large Permanent Fund Dividend (PFD) payouts unsustainable. “Those folks who think that we're gonna have a $3,000 or $4,000 dividend, just don't know what's going on,” he said, adding a full $4,000 draw would require a multibillion-dollar reduction elsewhere.

Rep. Louise Stutes and borough lobbyist Mark Hickey joined Stevens and outlined related items the borough will likely feel directly. Stutes said the Department of Education’s (DEED) plans are unsettled and pointed to a recent North Slope Borough bond vote that could change school reimbursement distributions: if the North Slope measure passed, DEED could withhold redistribution; if it failed, DEED could reallocate roughly $30 million among remaining districts. Hickey summarized his office’s fiscal review and said the House had included $6.7 million to restore community assistance funds that later was not adopted in conference committee.

On capital funding, the lawmakers urged Kodiak to prioritize and, for very large projects, consider segmenting requests across years so the state can fund smaller pieces. Stutes advised the borough to coordinate requests with villages to avoid duplicate applications for the same project.

School debt reimbursement and timing drew particular attention. The moratorium on issuing new school bonds has ended, meaning municipalities may now issue school debt, but reimbursement and the percentage covered can vary. Stutes and Hickey said the state’s school reimbursement rules tie state reimbursement to current-year payments; that mechanic can produce unexpected budget outcomes for projects issued late in a fiscal year.

The Marine Highway replacement vessel also drew questions. Stutes and Hickey said Buy America requirements and shipyard warranty issues have delayed the procurement process; an industry/bid day and subsequent formal bid milestones were discussed, and Hickey said realistic in-service delivery for a new mainline vessel is likely late 2029 or early 2030 if all goes well. Hickey and Stutes also flagged that federal operating funds from the Infrastructure Investment and Jobs Act helped operations and that sustaining those funds will be a future budget consideration.

Assembly members asked about possible revenue tools, including an income tax or changing oil tax credits; Stevens and Stutes confirmed the legislature has studied income- and sales-tax options but warned political obstacles remain. Stevens urged local presence in Juneau during budget negotiations, saying, “If you can be there during those negotiations, it truly does help a lot.”

What happens next: lawmakers urged Kodiak to finalize clear, prioritized capital lists, collaborate with villages on shared projects and maintain ongoing contact with the borough’s lobbyist and legislative delegation as session approaches.