Gov. Mike Dunleavy issued a hiring freeze and employee travel freeze on Friday for most sectors of state government, citing “declining oil revenue and tightening fiscal conditions.”
According to Dunleavy’s administrative order, all non-essential out-of-state travel, hiring and development of new regulations will be off the table.
Law enforcement, 24-hour care facilities, and frontline positions at agencies like the Office of Child Services and Division of Public Assistance are exempt from the hiring freeze. Exceptions for out-of-state travel can be granted through a waiver process for essential public safety or mission-critical duties.
“This is the right thing to do,” Dunleavy said in a Friday statement. “Alaskans expect us to manage their resources wisely. With oil prices dropping and our savings accounts unable to carry us through even one year of full state operations, we have no choice but to act now.”
Dunleavy said the state will continue fighting for “better educational outcomes, safer communities, and stronger support for Alaska’s families — but we must do so with discipline and focus.”
The state faces a deficit over the next two years due to a decline in forecasted oil prices. The Department of Revenue’s spring forecast dropped oil to $68 a barrel for Fiscal Year 2025-2026. Two years ago, it hovered around $85 a barrel.
Dunelavy noted that the state’s reserves, including the $2.8 billion Constitutional Budget Reserve, the $1 billion Power Cost Equalization Endowment, and a $407 million higher education investment fund, won’t be able to cover a year of state operations.
On Friday, the House rejected a Senate version of the upcoming budget, in part because of the $1,000 Permanent Fund dividend. Representatives cited the need for a preferred $1,400 dividend and sent the budget bill back to the Senate, indicating a likely need to hold a concurrence hearing.
Dunleavy’s administrative order cites the drop in oil price due to the Organization of the Petroleum Exporting Countries (OPEC) boosting its output earlier this year. The drop to $68 a barrel reflects “a 20% drop from the prior year and resulting in a revenue shortfall of hundreds of millions of dollars.”
The Alaska Legislature and Dunleavy’s office remain at odds over a proposed increase to the state’s Base Student Allocation, the core component of the state’s education funding formula. Dunleavy already vetoed one bill this year that would boost the BSA by $1,000 and lawmakers were unable to overturn the veto. The governor argued he will not support any bill that doesn’t contain measures such as open enrollment and for the state to directly approve charter school applications.
A second bill, House Bill 57, includes provisions for reading grants, requirements to implement cellphone regulations and a $700 BSA increase. However, Dunleavy signaled to superintendents last week that he will veto the bill unless lawmakers adopt policies he wants for education. He also indicated that if the Legislature overrides his veto, he would still line-veto the additional education funding.
The Alaska Legislature also approved its first tax measure in years, Senate Bill 113, which imposes a corporate income tax on out-of-state online businesses. It could generate between $25 million and $65 million a year and would be earmarked for career and technical education and reading incentive grants.
The Alaska Senate is also pushing SB 92, which closes the corporate income tax rate loophole for Hilcorp LLC and other private oil and gas companies, a tax that publicly traded corporations already pay. It would generate $150 million, but it could face challenges in the House.
A third bill, SB 112, reduces the tax credit for oil companies from $8 to $5 a barrel, but supporting senators have noted it might advance this year. However, it could raise between $100 million and $300 million a year.
In a Wednesday memo to lawmakers, Dunleavy stated that he opposed “tax-and-spend” measures and instead called on the Legislature to form a joint team with his administration to create sustainable, long-term fiscal plans — a concept that has been proposed for years but has always lost traction.
“As I have consistently stated since my first term, a truly durable fiscal plan must include revenues, but it also requires clear guardrails: spending limits, statutory and regulatory reviews, and policies that make Alaska the most competitive state in the nation for investment and new business growth,” Dunleavy wrote.
