House Finance hears governor’s FY2025 supplemental budget; $543.7 million requested, litigation and workforce items highlighted

The House Finance Committee heard an overview of the governor's fiscal year 2025 supplemental budget on Feb. 4, 2025, during a presentation by Lacey Sanders, director of the Office of Management and Budget. Sanders told the committee the package totals $543.7 million in supplemental requests, of which $97.5 million is unrestricted general fund (UGF). She said the changes bring the state to an overall fiscal-year 2025 deficit of about $171 million, a shortfall the executive proposes covering with the Constitutional Budget Reserve Fund.

The presentation covered operating, statewide and capital supplementals and several department-specific items that committee members pressed state staff to explain. "This brings our total deficit for fiscal year 2025 to $171,000,000," Sanders said as she reviewed the summary slide.

Why it matters: Supplemental appropriations alter the fiscal year’s spending plan outside the main budget bill and can affect programs and services this year and into the next. Committee members probed which requests are one-time adjustments and which would roll into the FY2026 base budget.

Key figures and scope - Total supplemental requests presented: $543,700,000, including: - Agency operations supplementals: $448,000,000 (including $83,200,000 state general funds) - Statewide operations supplementals: $15,100,000 (including $14,300,000 UGF) - Capital supplementals: $71,500,000 (none from unrestricted general funds) - Projected FY2025 deficit after supplementals: ~$171,000,000 (noted as proposed to be drawn from the Constitutional Budget Reserve Fund)

Major departmental items discussed - Department of Corrections: A $4.1 million operating supplemental composed of two items, including about $3.9 million to cover supervisory standby pay that was not included in the FY2025 budget and $195,000 to fully fund Dillingham jail operations. Committee members asked how many supervisors the adjustment covers; the OMB team said they would follow up with that detail.

- Department of Education and Early Development: An increase for Alaska Performance Scholarships and related Alaska Education Grants after the Alaska Commission on Postsecondary Education refined student counts and award amounts following HB 148. The committee asked how the change affects the higher education investment fund (HEIF) draw; Sanders said the nearly $1 million addition remains within the statutory draw limit.

- Department of Health: A Medicaid projection increase of $14.2 million to align the department's FY2025 appropriation with finalized December projections.

- Department of Law and litigation costs: A $4 million supplemental request to cover ongoing litigation expenses for the lawsuit brought by the group referred to in the presentation as A Better Childhood. Deputy Attorney General Corey Mills briefed the committee on the case, calling it an "institutional or structural reform case" that seeks broad changes to Alaska’s child welfare system and has produced extensive discovery and depositions. Mills said similar large-scale cases have proved costly in other states and noted the trial schedule targets May 2025.

Mills told the committee: "This is a fairly rare instance... That's how expensive it is," and referenced comparisons to other states, including Oregon, which spent roughly $18 million to litigate to the eve of trial and then settled.

- Labor and Workforce/AVTEC industrial electric expansion: The Department of Labor and Workforce Development requested $888,000 in FY2025 to purchase lab trainer equipment, cover procurement and start-up costs, and recruit adjunct instructors so AVTEC can expand industrial electric instruction. Dr. Corey Ortiz, director of AVTEC, said the program currently serves about 15 students a year and the supplemental would increase capacity to about 30 students annually.

Ortiz said: "Right now we can serve about 15 students per year. The supplemental would allow us to increase that number to 30 students approximately."

- University of Alaska: Multiple supplemental lines to reclassify nonfederal grants and contracts into other statutory designated program receipts (a correction to how those receipts were recorded) and to raise receipt authority to the amount the university expects to collect from nonfederal awards.

- Alaska Oil and Gas Conservation Commission (AOGCC) and orphaned wells: A capital request of $65 million for AOGCC related activities, including an anticipated $40 million application to the U.S. Department of the Interior for plugging orphaned wells and a $25 million formula grant for similar purposes. Committee members were told part of the work includes an IT upgrade where AOGCC will leverage about $1.7 million in third-party funds and put state regulatory cost charge receipts toward the state share of the project.

- Department of Transportation and Public Facilities: $6.5 million for Alaska Marine Highway System vessel maintenance and overhauls on four ships, including steel and engine work on specific vessels named in the presentation.

- Rural airport maintenance: Contract increases for maintenance at rural airports funded from rural airport leasing receipts (funds generated by leases and airport rentals treated as a pooled rural airport system resource). Dom Pinone, DOT director of program management and administration, explained the leasing receipts come from tenants and commercial users and feed the rural airport system.

- Capital reappropriation to disaster relief: A $3 million reappropriation from an older DOT capital project (Earthquake Relief Federal Ineligible Costs) into the state's disaster relief fund to raise the fund balance. OMB said the original appropriation is unobligated and the department does not anticipate further earthquake costs.

- Judgments and claims: The supplemental includes a package of judgments and settlements for the fiscal year; the presentation summarized about $2.8 million in special appropriations for judgments and claims to date. Committee members also discussed the Brett Lane case at length: the transcript shows a prior jury award of about $2.6 million, a later global settlement for about $1.8 million, and adjustments for interest that brought the judgment-related amount to roughly $2.6 million as presented.

Discussion vs. decisions Committee members asked for follow-up detail on several items (for example, how many supervisors are covered by the corrections standby-pay calculation and the detailed breakdown of the $888,000 AVTEC request). OMB and department officials said they would provide follow-up details in writing or at a later meeting. No formal motions or votes were recorded in the transcript; the session was a presentation and Q&A.

Next steps and context Sanders and OMB staff offered to walk members through the supplemental spreadsheet line by line in follow-up and said departments provided supplemental narratives and a capital-appropriation status report that is publicly posted. The committee scheduled a subsequent House Finance meeting for Feb. 5 to hear a presentation from the Mental Health Trust Authority.

Ending note The supplemental package mixes one-time capital and program startup costs with some items that OMB said correspond to the governor's FY2026 budget proposals; committee members repeatedly asked OMB to identify which items would create ongoing obligations in FY2026 and requested further line-item detail in follow-up materials.