September 4, 2026

September 2026 LFD Newsletter

This issue includes updates on the FY26 supplemental "waterfall" appropriations and Alaska Marine Highway funding.

Department of Revenue Confirms All FY26 Supplemental Contingent Appropriations

As we wrote about in previous newsletters, the FY26 supplemental budget includes three appropriations that are contingent on surplus revenue resulting from higher oil prices. The appropriations bill stated that the Commissioner of Revenue shall determine the status of these appropriations on August 31, 2026. Accordingly, Revenue Commissioner Janelle Earls confirmed on August 31 that all three appropriations can be made in full and the additional surplus will be deposited in the Statutory Budget Reserve Fund.

According to the memo, the transfer amounts will be:

1. $127.9 million for a $200 energy relief payment for individuals. This will be added to the FY27 Permanent Fund Dividend amount, resulting in a total payment of $1,200 per individual. (LFD's estimate for this item in earlier budget reports was $127.3 million.)
2. $115.0 million for K-12 school districts per the statutory foundation formula, to be paid out in FY27. (LFD's earlier reports assigned a zero value to this and subsequent appropriations based on the Spring forecast).
3. $15.0 million to increase the capitalization of the Bulk Fuel Revolving Loan Fund.
4. $341.2 million to the Statutory Budget Reserve (SBR).

The actual surplus for the year will be determined based on audited figures and may differ from this estimate. This could cause the actual SBR transfer to be adjusted in the future.

As of August 31, FY26 revenue exceeded the Spring 2026 forecast by about $441 million. In addition, our updated analysis increases the projected FY26 surplus by $129.6 million relative to our previous fiscal summary, reflecting our revised estimate that no funds will be needed to recapitalize the Higher Education Investment Fund (HEIF). (In FY25, the HEIF was used to fill the budget deficit, and then that amount was repaid from the general fund in FY26. Subsequently the FY25 budget deficit was revised into a surplus, making this appropriation unnecessary.)

The revised short fiscal summary below is based on the 8/31 memo. The official fiscal summary will be published in the Summary of Appropriations later this fall. Note that in addition to the FY26 changes discussed above, there have been other updates to FY27 figures that increase the projected surplus to $106.3 million.

Alaska Marine Highway Receives Federal Operating and Capital Grants

The Alaska Marine Highway System's (AMHS) grant application for the FY26 and FY27 Federal Transit Administration Rural Ferry Program was accepted in August. With the addition of $161.5 million in federal operating funding, the FY26 and FY27 AMHS operating budgets are nearly fully funded, reaching nearly all the $166.2 million in budgeted Federal Receipt authority. Backstop funding of $5.0 million in UGF for FY26 covers the remaining difference. Because the grant was received, however, the $33.1 million UGF backstop provision included in the Enacted FY27 budget was unnecessary and was not triggered. As this item was unlikely to be triggered and was counted as a zero in LFD reports, this does not change the projected size of the FY27 budget.

AMHS also received $249 million in capital project funding across five capital projects. Since the administration has historically applied for capital grants and requested budget authority only after the award is made, the legislature should expect these five capital requests as part of the FY28 budget process.

For a more detailed explanation of the AMHS budget structure and federal funding issues please see the budget narrative portion of the FY27 DOT&PF Enacted Budget Book starting on page 6.

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