Senate Finance hears governor's budget amendments, advanced construction and corrections pay increases highlighted

Juneau — The Alaska Senate Finance Committee heard a presentation from Lacey Sanders, director of the Office of Management and Budget, on amendments transmitted to the Legislature for the fiscal 2025 supplemental and the governor's fiscal 2026 proposed budgets.

Sanders told the committee the FY2025 package included three Fast Track supplemental items totaling $2.7 million, three regular supplemental operating amendments totaling $4.5 million and one $0 capital item, for a combined $7.2 million in unrestricted general funds. She said the fiscal summary incorporated the Department of Revenue's spring forecast and showed an updated deficit of $164.7 million after those changes.

Why it matters: The amendments include multiagency collective-bargaining costs, corrections operating needs and a major set of capital allocations under the State Transportation Improvement Program (STIP) that increase federal receipt authority for transportation projects. Together with the governor's capital amendments, Sanders said, the overall deficit shown in the packet rises to about $1.648 billion and the budget continues to rely on draws from the Constitutional Budget Reserve Fund.

Key details from the presentation

- Department of Agriculture: Sanders said a March 5 amendment reduces a previously proposed $2.7 million add for establishing a new Department of Agriculture under Executive Order 136. The administration plans to staff the new department by transferring existing vacant positions from the Department of Natural Resources rather than adding 13 new positions. Sanders said the ongoing cost to operate the department is currently estimated at about $9 million; she said the number of positions "would remain the same" and that any new position requests would be brought to the Legislature.

- Corrections: Sanders said an interest arbitration award for the Alaska Correctional Officers Association produced an 11% increase for those members in FY2026, which she listed as a $14.4 million cost. For FY2025 supplemental requests, she said finalized community residential center (CRC) contracts for the Tundra Center in Dillingham and the Seaside Center in Nome increase FY2025 spending by $2.0 million. Sanders also described an approximately $2.5 million FY2025 increase for Department of Corrections physical health care to cover inmates entering custody with complex medical needs; she said costs are being addressed through overtime and hiring additional staff.

- Education and University contracts: Sanders described a collective-bargaining agreement for Mount Edgecumbe teachers that provides multi-year increases and a University of Alaska agreement covering bargaining-unit academics that includes a 2.75% increase for FY2026 and additional scheduled raises for later years. She said the university item totals about $3.2 million for FY2026, with roughly $2.3 million in unrestricted general funds. Sanders noted negotiations remain outstanding for six other bargaining units and a pending Board of Regents approval for adjunct academics.

- Retirement contributions fast-track supplemental: Sanders said the Division of Retirement and Benefits is seeking a Fast Track supplemental of about $2.7 million to cover lost interest earnings after a security breach delayed employee and employer payroll deposits into retirement accounts. She said the division worked with a contractor to identify missed payroll contributions and used a U.S. Department of Labor calculator to estimate the interest owed, and that the administration will provide backup calculations to the committee.

- Capital and STIP changes: Sanders said capital amendments submitted with the governor's packet total about $223 million in project allocations, with $0 in unrestricted general funds, and that the amendment packet includes an increase in advanced construction (AC) projects. Senator Kiel (recorded in the transcript as asking about the AC total) and Sanders discussed an estimate of roughly $315 million of additional AC authority; Director Dom Pinone of DOT told the committee the request reflects federal fiscal year 2026 project timing and is meant to give the department flexibility to increase project throughput next construction season.

- Veterans cemetery scope change: Sanders said a scope change for the Interior Alaska Veterans Cemetery near Fairbanks would repurpose an existing prior appropriation of about $95,000, originally limited to ditch mitigation, to pay for design and other costs needed to advance the site.

Questions and follow-ups

Committee members asked for more granular information on CRC bed counts and the DOT AC balance; Sanders said she would follow up and provide committee members with the requested details. Senator Kaufman asked for documentation of the retirement-interest calculation; Sanders said the administration would supply the underlying documents.

No formal votes were recorded during the meeting. The committee adjourned after Sanders completed the presentation; it was scheduled to reconvene the next day to hear the University of Alaska's deferred maintenance list.