Capital budget slashed; IEP bill approved

The capital budget passed April 27 was little more than a formality this year.

Nearly 70 percent of the $108.3 million in unrestricted general fund appropriations made by the Legislature for fiscal year 2016 will be used to match federal receipts.

A mere $7.7 million of unrestricted general fund money was approved for optional spending statewide. That amounts to virtually a complete cut in state capital spending from the comparative appropriations of $444.2 million in 2015 and $627.6 million in 2014.

It is even a significant reduction in spending from the $150.3 million Gov. Bill Walker proposed in January.

Senate Finance co-chair Anna MacKinnon, R-Anchorage, who led the capital budget construction, said April 27 that committee members were consulted during the process and ultimately agreed to no discretionary spending in the capital budget.

“There were many requests that have been unmet on the capital side,” MacKinnon said.

Her staffers compiled a list of roughly $3 billion worth of capital requests that were sent to the committee, she noted.

With the state facing a budget deficit approaching $4 billion in fiscal 2016, the Legislature is prepared to accept more than $1.27 billion from the federal government, a $130 million increase from 2015 and $330 million more than 2014.

MacKinnon said leveraging as much federal money as possible should help minimize the impact of state cuts.

Still, the overall $1.49 billion capital budget is down about 30 percent from last year.

The only significant appropriation is $43.2 million to fund construction of a new school in the Northwest village of Kivalina. It is the state’s last remaining obligation from the settlement the state reached in 2011 in the lawsuit known as the Kasayulie education suit, which claimed Alaska’s rural schools were not funded on par with urban districts.

In the settlement, former Gov. Sean Parnell agreed the state would contribute $146 million over four years to fund five rural school projects.

The money for the Kivalina school will not come from the general fund, however. The Legislature decided to pull the $43.2 million from the Alaska Capital Income Fund, a savings account of sorts, for returns on investments made by the Revenue Department.

Walker’s capital budget included $7.1 million to design the school and early work for an access road to the school site.

Also pulled from the governor’s proposal was $3 million for the Alaska Housing Finance Corp. Home Energy Rebate Program, a popular program that for several years reimbursed homeowners for energy efficiency improvements made to their homes.

At the same time, funding for AHFC’s weatherization program for low- and middle-income residents increased from $6.6 million to $7.1 million. Of that, $5.6 million is set to come out of the general fund.

The Legislature also halved funding for the Cold Climate Housing Research Center from $1 million to $500,000. The Legislature’s appropriation is on par with what the research-focused nonprofit has received in recent years.

Left out in the cold was the University of Alaska. Legislators cut an $8 million appropriation in Walker’s budget to fund ongoing construction of the University of Alaska Fairbanks’ engineering building.

UA President Pat Gamble had told the Senate Finance Committee that $8 million would extend construction from August to January and allow for about a quarter of the building to completed and used by students.

The cut came despite public testimony to Senate Finance that greatly supported keeping the UAF construction funding in the budget.

The governor’s $8 million proposal for deferred maintenance work on UA facilities was cut to $3 million.

The governor can cut or trim line items from the budget but cannot add in any appropriations back in. Walker said April 27 that he would look closely at ways to reduce the capital budget further.

“There’s not a huge amount of room in the capital budget but if there’s ways of tightening it up, we will. We have to look at everything at this point,” Walker said.

The budget included $45.3 million in future federal receipt authority for the Knik Arm Crossing — authority added in during House Finance hearings.

An administrative order issued by Walker in December halting work on six “mega projects,” including the Knik Arm Crossing, across the state as they are evaluated by the administration is still in effect, according to a Walker spokeswoman.

Interior Energy Project

Legislation allowing the managers of the Interior Energy Project to spend money on a Cook Inlet-generated plan also passed the Legislature April 27 without requiring further legislative approval of a project.

The subject of unforeseen debate and amendments in the House Resources and Finance committees, House Bill 105 ultimately came out looking fairly similar to the version submitted by Walker.

“The economic future of the Interior depends on low-cost energy being delivered to its residents. At the end of the day, conditions in Fairbanks have not changed, and relief in the form of clean, affordable energy is needed now,” Walker said in a release. “HB 105 provides a clear path to accomplish that.”

The original intent of the bill was to allow the Alaska Industrial Development and Export Authority to use much of a $332.5 million financing package passed in 2013 to get natural gas to the Interior from anywhere, not just the North Slope, as earlier legislation required.

The authority to investigate and possibly construct a small pipeline system from Cook Inlet or shift the project’s focus to propane was added in the Senate.

Several House Republicans from Anchorage supported language in the Resources version of HB 105 restricting AIDEA from spending money on a plan without legislative approval. Those amendments would have delayed the project’s 2016 goal to deliver gas to the Interior by at least a year, IEP managers said. They were removed in House Finance hearings.

However, HB 105 does restrict the authority’s ability to enter into a gas supply contract for the Interior market unless the primary customer utility is owned by AIDEA, which is evaluating the purchase of Fairbanks Natural Gas and its sister companies. It also limits the amount of money the authority can loan for capital investments to the Interior Energy Project.

Removed from the last version of the bill was $240 million of bonding authority for AIDEA to finance Southcentral electric transmission line overhauls.

AIDEA’s monthly board meeting was scheduled for April 30.

Elwood Brehmer can be reached at [email protected].

11/20/2016 - 8:43am