State funds in slashed capital budget down 91% from 2013

Photo/Courtesy/University of Alaska Fairbanks

Gov. Bill Walker’s capital budget is short, but not very sweet.

The total proposed capital spend would be $1.4 billion under the governor’s proposal; of that, $150 million would be unrestricted state general funds.

While federal dollars always make up a large share of the state capital budget, general fund spending is the real indicator of the state’s situation. The $150 million in Walker’s initial budget is a 71 percent decrease from the current 2015 fiscal year unrestricted capital spend of $510 million.

Just a few years ago in fiscal 2013, the unrestricted general fund spend was about $1.7 billion.

Plunging oil prices have put the state upwards of $3.5 billion in debt for fiscal year 2016, according to the Revenue Department.

Walker released his budget shortly after his State of the Budget address Jan. 22.

He said in a press conference the following day that the special speech detailing the state’s fiscal situation was a critical and tough one to relay.

“Alaskans just need to know where we are,” Walker said.

More than a third of the general fund spend in his current budget — $62.9 million — will be used to match federal Transportation Department program funding.

Federal funds comprise more than $1.2 billion, about 84 percent, of the entire capital budget.

Walker said the state needs to cut its overall annual general fund spend between the operating and capital budgets by 25 percent in the coming years. Such a prospect assuredly means minimal capital budgets in years to come.

In his speech he said proven programs such as the Alaska Housing Finance Corp.’s. Weatherization and Home Energy Rebate programs would be funded in the future. The energy efficiency enablers received a combined $9.6 million from Walker, with a $1.5 million federal match.

An $8 million allocation to the University of Alaska Fairbanks for construction of its engineering building made its way into the governor’s budget. In November, the University of Alaska Board of Regents asked for $31.3 million from the state to complete the $111 million project as part of its fiscal 2016 capital request. The regents also requested $50 million for deferred maintenance and repair work and got another $8 million in Walker’s budget.

The Alaska Energy Authority’s Susitna-Watana Hydro project; the Alaska Industrial Development and Export Authority’s work towards an environmental impact statement for an industrial-use Ambler Mining District road; Department of Environmental Conservation wetlands permitting revision; Fish and Game’s Chinook Salmon Research Initiative; and a new Blood Bank of Alaska building in Anchorage are notable exclusions from the capital plan.

Former Gov. Sean Parnell had a total of $39.8 million in his partially completed capital budget for the five projects.

The Alaska Railroad Corp. is also requesting $21.8 million to keep its Positive Train Control development on track. Combined with prior appropriations, the federally mandated and unfunded safety system for passenger railroads will ultimately cost the state and the railroad about $156 million to implement through fiscal year 2018.

In his Jan. 22 speech, Walker said he wants the state to invest more in resource development infrastructure through financing as it did with the Red Dog Mine road in Northwest Alaska more than 25 years ago.

While a contentious issue among area residents and environmental groups, the roughly 200-mile Ambler road proposal would be a very similar project, and would provide access to copper deposits that could possibly support one or several mines just south of the Brooks Range. AIDEA needs $6.8 million to complete an EIS for the road, according to an authority report.

Walker said in a press conference the road would be looked at along with the other large state projects he put on hold to see which made sense to pursue. The key, he said, is making sure a company can commit to a mine before spending more money.

“Are there companies that are ready to step up today and say they are ready to pay and step up today and be a participant financially?” he said. “That’s what we’re looking for to take it to another stage of permitting; is there a company that wants to come in and take that process over? That’s the kind of discussion we will have.”

The most likely participant is NovaCopper, which has been exploring the Ambler Mining District for years. Company CEO Rick Van Nieuwenhuyse said NovaCopper has spent nearly $85 million acquiring and exploring the Arctic and Bornite deposits in the region and is hoping to have a feasibility study on Arctic done by in 2017.

“We’ve got skin in the game,” he said.

Van Nieuwenhuyse said he understands the state’s fiscal situation, but noted that no general funds would be used for road construction. State investment in permitting the road would encourage other deposits in the 75-mile long district to be developed by other companies, he said.

Whether the road construction is financed by AIDEA loans or bonds or paid for directly by private money is still up for discussion.

He said NovaCopper financing the EIS is something the company would consider, but not before its feasibility study is complete.

Elwood Brehmer can be reached at [email protected].

11/07/2016 - 9:30pm