A last-minute budget agreement enabled the Alaska Legislature to end its session as required by midnight Wednesday.
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The plan lawmakers reached would fund schools, share revenue with communities and deal with the rising costs of state retirement programs, but it would take care of those issues for one year only.
Gov. Sarah Palin on Thursday praised the work of the Legislature, but declined to say where she might be inclined to use her line-item veto.
During the remainder of the year, a special task force will look at school funding issues and try to get the legislative process started earlier next year. Legislators waited 116 days into the 121-day session to introduce the first funding plan this year.
Several lawmakers expressed concern the budget spends too much money overall, especially with oil production declining at a rate of 6 percent a year.
Sen. Lyman Hoffman, D-Bethel, one of the key budget negotiators for the Senate, said the budget was actually fairly conservative and it even put away some of this year's surplus for the future.
"This Legislature did not spend every dollar," said Hoffman, co-chairman of the Senate Finance Committee.
Hoffman said the budget set aside $1 billion for education next year, as well as making a $50 million contribution to the Constitutional Budget Reserve, the first time that has happened in years.
Hoffman is a member of the Senate Working Group, the bipartisan coalition that controlled the Senate under the leadership of Senate President Lyda Green, R-Wasilla.
Senate Republican Minority Leader Gene Therriault, R-North Pole, said he was concerned about the level of spending and questioned whether it was sustainable.
The budget passed 14-5 in the Senate, with Therriault's minority voting against it.
In the House, Rep. Mike Doogan, D-Anchorage, also objected to the size of the expenditures.
He acknowledged that some of the money that appeared to inflate the budget was actually being set aside for the future, but "we're still spending a tremendous amount of money."
Much of that money will be spent in Anchorage due to a last-minute adjustment to the revenue sharing system, through which the state government shares some of Alaska's oil wealth with cities and boroughs.
One of the key negotiators on the House side was Rep. Kevin Meyer, R-Anchorage. Other lawmakers said he pushed for a bigger share for his city.
On Wednesday, the revenue sharing plan in the state's capital budget was rewritten to Anchorage's advantage.
That gave Anchorage millions more than had previously been proposed, though other big boroughs saw gains as well. Most small communities were losers, and some were big losers.
Juneau gained nearly 10 percent over the original plan. Gustavus, Kake and Angoon all lost money.
Taking the biggest losses from what they expected were Kotzebue, Barrow and Bethel, each down 60 percent or more.
Rep. Mary Nelson, D-Bethel, said many Republican legislators who supported changing the revenue sharing distribution were unaware of what House leaders had suddenly given them to vote on.
"This amendment was put on our desks at six o'clock at night on adjournment night," she said, asking that the Legislature reconsider its approval.
"There were majority members unaware that their communities were losing over a million dollars, their districts were losing that much - and Anchorage was gaining that much," she said.
Nelson's motion for reconsideration failed along party lines.
Meyer said the capital budget also includes numerous projects for communities around the state, where the state will pick up costs that small towns won't have to pay for.
"I would say the capital projects are revenue sharing," he said.
Rep. Les Gara, D-Anchorage, said those capital projects were doled out based on party affiliation in the House, which is not how the state government should operate.
Gara said House districts 1 and 2, represented by Kyle Johansen, R-Ketchikan, and Peggy Wilson, R-Wrangell, each got an extra $500,000 because they were in the majority party.
"We should not spend money in this state based on party membership," Gara said.
Several plans to make changes to the school funding Foundation Formula foundered, but lawmakers agreed on a one-year solution. During that time the Joint Legislative Education Funding Task Force will try to come up with a better, longer term solution.
"We've agreed to continue this work through summer," he said.
John Bitney, Gov. Sarah Palin's legislative liaison was working the budget process during the final day as a buffer between the House and Senate.
Watching the final vote just before midnight, he said he was generally pleased with the outcome.
"There's some things we still need to review, but overall it looks pretty good," he said.
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