Gov proposes status quo budget, lower capital spending


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Gov. Sean Parnell released his proposed Fiscal 2014 budget Dec. 14 as required by law. The spending plan is basically status quo with the current year in operations spending, although the final budget will be prepared by the state Legislature after it convenes in Juneau in January.

The governor’s total proposed operating budget is 1.1 percent larger than current year operations spending authorized by the Legislature, and the proposed $1.815 billion capital budget is about what Parnell initially proposed last year.

The governor said he has left room for the Legislature to make additions. There are revenues sufficient for about $500 million in additional capital projects added by lawmakers.

“This balanced budget spends less than the current year,” Parnell said in a statement. “As we prepared this budget, we faced the facts — oil production is down, and oil prices, too, have decreased. Production decline and the increasing cost of producing Alaska’s oil profoundly impacts Alaska’s revenues.”

In Parnell’s proposal, the budget totals $6.49 billion in state general funds and $12.8 billion when federal funds, other spending and the Permanent Fund are included. The budget leaves more than $500 million in surplus revenue, the governor said.

There are some things that are not yet included in the operating budget, however. One is money for new state public employee contracts that are expected to be finalized this spring, administration officials said in a briefing on the budget held Dec. 14.

While the state operating budget will remain similar to the current year, the state capital budget may be down. In the current fiscal year 2013 budget, for the year ending next June 30, the Legislature was able to add about $1 billion to the governor’s initial budget proposed capital spending of about $1.8 billion.

That brought total Fiscal 2013 capital spending to $2.88 billion for the current year.

For Fiscal 2014, which begins next July 1, Parnell invited lawmakers to add about $500 million in projects, which would bring the Fiscal 2014 capital budget to about $2.3 billion if the governor can hold the legislators to that amount.

“As I’ve done in the past, I am asking legislators to join me early in session to set a spending limit,” Parnell said in the budget statement. “A self-imposed, reasonable limit is the key to successful and sustainable spending. A spending limit promotes spending restraint and greater accountability for Alaskans.”

The governor’s proposed budget is just a starting point because the final Fiscal 2014 budget will be set by the Legislature next spring, and before finalizing the spending plan lawmakers will await the Department of Revenue’s spring update to the revenue forecast. That typically comes in early April.

Here are some highlights from the governor’s budget proposal:

• Parnell proposes to continue the “Roads to Resources” program with $18 million in state funds, much of it intended for the planned road to the Ambler Mining District from the Dalton Highway in the Brooks Range.

The Alaska Industrial Development and Export Authority is discussing a “public/private” partnership with mining companies, including NANA Regional Corp., that are working to develop copper and precious metal prospects in the western Brooks Range.

• $50 million is allocated for work on natural gas pipeline projects, half as reimbursement to TransCanada Corp. under its Alaska Gasline Inducement Act contract with the state, and half to Alaska Gasline Development Corp., or ADGC, the state corporation working to develop a 24-inch gas pipeline from the North Slope to Southcentral Alaska.

That is considered an alternative in case the large-diameter pipeline being pursued by TransCanada and North Slope producing companies is delayed or does not move forward. The funding for ADGC will basically allow it to continue doing limited engineering and other work, Parnell said in his budget briefing.

The corporation needs separate legislative authorization to access $200 million set aside for the 24-inch pipeline project two years ago. That will be coming in a bill to be introduced by legislators.

• The governor also plans to spend $56.5 million for village safe water projects, much of it federal money but with a significant state share. This amount is similar to what is being spent this year on the village safe water program.

• Also on village safe water, Parnell is proposing to separately spend $5 million for development of new-technology water and wastewater systems suitable for small rural communities. This builds on $1 million in the current year DEC capital budget for research in this area. The problem is that many rural water/wastewater systems built in the 1980s will need replacement soon and DEC is searching for more advanced and efficient options.

• In education, the governor has proposed $8 million for the Alaska Performance Scholarships, $14.6 million for early education, $46.2 million in state aid for school construction and $22.3 million for schools’ major maintenance projects.

“Our fiscal plan is based on budget discipline, saving for the future, and prudently managing reserves to help us through times when revenue is down,” Parnell said in his budget statement. “Our plan also relies on resource development, so Alaskans, today and in the future, will have access to economic opportunity and essential public services.”

Legislative leaders said they would cooperate with Parnell in the budget process.

In a statement, incoming Senate President Charlie Huggins, R-Wasilla, said:  “According to new forecasts, Alaska is going to see a drop in revenue next year.  We think Governor Parnell is headed in the right direction by reining in state spending while still focusing on in-state energy needs and public safety.”

Sen. Kevin Meyer, R-Anchorage, said, “I am very pleased to see Governor Parnell take a fiscally conservative approach to this year’s budget, especially considering the forecasted drop in revenue.”

Meyer will be co-chair of the Senate Finance Committee when the Legislature convenes in January.

“The new Senate Finance Committee plans to spend the next three months working on this proposal and will hold public hearings to make sure all ideas are considered,” Meyer said.

Both Senate and House Finance Committees will start work on the capital and operating budgets shortly after the 28th Legislature begins work on Jan. 15, Meyer said.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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