Alaska House Advances FY27 Budget Closeouts, Prioritizes Medicaid and Infrastructure

The Alaska House Finance Committee has begun deliberations on the Fiscal Year 2027 (FY27) operating budget, advancing closeout reports for six key state agencies. The reports, covering the Departments of Law (DOL), Health, Family and Community Services (DFCS), Administration (DOA), Corrections (DOC), and Transportation and Public Facilities (DOT&PF), largely align with Governor Mike Dunleavy’s proposals, with some targeted adjustments focused on fiscal alignment, infrastructure investments, and support for vulnerable populations.

Department of Law Budget Review

The Department of Law’s closeout report was adopted without subcommittee additions, incorporating all five of the Governor’s proposed items. Adjustments included a $500,000 decrement in interagency receipts for uncollectible funds in Civil Division litigation, and increases totaling $33,400 for IT classification study implementation within Administrative Services and Legal Support. The net impact results in a $6,100 Unrestricted General Fund (UGF) increase and a $462,100 decrease in other funds.

Health and Family and Community Services Budgets

The Department of Health’s overall budget is set to increase by $460 million (12.1%) from the FY26 adjusted base, with a $78 million UGF increase (7.3%) primarily driven by Medicaid expansion and associated costs. Governor’s proposals included a $10 million UGF decrement for behavioral health rates (offset by supplemental carryover funds from FY26), $43 million UGF for Medicaid provider payments, $11.3 million UGF for eligibility systems upgrades, and $3.7 million UGF for a virtual contact center aimed at reducing backlogs.

The subcommittee added $625,000 UGF for private duty nurse (PDN) rates, anticipating $30 million in annual Medicaid savings. Staff estimate these savings could be realized almost immediately, projecting $84,000 in daily savings for eight patients.

The Department of Family and Community Services (DFCS) saw a $5 million overall decrease (1%) from the adjusted base, largely due to alignment with federal receipts. However, the department is slated for a $3.2 million UGF increase (1.1%). Governor’s actions included a $474,000 UGF transfer from Health for youth residential services, alongside minor classification adjustments. The subcommittee added $1.5 million UGF to Children’s Advocacy Centers (CACs) to offset cuts to Victims of Crime Act funding, and allocated funds for OCS workforce stabilization to ensure compliance with HB 151, with intent language supporting kinship placements.

Other Agency Budget Highlights

The Department of Administration (DOA) budget totals $349.1 million, representing a less than 1% all-funds increase from the House Committee Substitute 1 (HCS1), driven by IT classification adjustments. Compared to the Governor’s proposal, the DOA budget reflects a $567,700 interagency decrease through the elimination of vacant Deputy Commissioner and Chief of Operations positions. Governor proposals, such as Shared Services deconsolidation, were adopted. However, the narrative flagged partial noncompliance with FY26 intent regarding AlaskaCare health plan rates, potentially leading to $18.5-$26.3 million in lapsed funding.

The Department of Corrections (DOC) budget, totaling $523.4 million, fully accepts the Governor’s requests, including $20 million UGF for personal services and inmate transport, $3.1 million UGF for medical staff, and $1.7 million for community residential centers. The committee expressed intent to quantify the costs associated with community and regional jails for FY28 budget discussions, representing a $29.7 million UGF change from CS1.

The Department of Transportation and Public Facilities (DOT&PF) budget totals $678 million, with no change from the Governor’s amended proposal. All items were accepted, including approximately $400,000 across funds for IT classification and $7.9 million UGF restorations for maintenance, offset by $3.5 million in deleted positions due to reorganization. Funding for the Alaska Marine Highway System (AMHS) will utilize multi-year language to provide flexibility with federal grant funding. While appearing as a cut at first glance, staff clarified that funds are being moved, not reduced, representing a $156 million difference from CS1.

Fiscal Outlook and Considerations

These initial budget closeouts indicate a cautious approach to fiscal stability amidst increasing demands. UGF increases in Health and DFCS address Medicaid growth and support vulnerable populations, while savings from initiatives like the PDN rate adjustments and federal alignments aim to avoid “hollow authority.” Decrements in other areas, such as the Department of Law and DOA, and efficiencies within DOT&PF contribute to fiscal prudence. Intent language ensures accountability and further study in areas like DOC jail costs and DOA health plan compliance. A query regarding the Permanent Fund Dividend (PFD) equated $118 million (similar to DOT&PF funding) to approximately $160 per person, highlighting the trade-offs inherent in a resource-constrained budget.