Operating budget to be on House floor soon; concerns over its price tag

Rep. Mike Chenault, R-Kenai and co-chair of the Finance Committee, said he expects the bill to be on the floor of the state House on March 3 or March 4.

Palin’s budget, introduced in January at the start of the 2008 session, proposes $173.1 million in additional general fund spending for state agency operations and growth of “formula” programs like Medicaid, where spending requirements are set out by statute and matching requirements for federal funds.

Meanwhile, some legislators are warning that growth in spending, combined with declining oil production, is putting the state at risk.

A projection prepared by the Legislative Finance Division for Sen. Gary Wilken, R-Fairbanks, estimates that an average crude oil price of $66.32 per barrel would be needed during the upcoming state fiscal year 2009, which starts July 1, to balance the budget.

Oil prices are expected to remain at ranges higher than that – they have averaged $82.15 per barrel so far this fiscal year – but the state could be facing financial difficulties if some unforeseen international event were to bring prices down, Wilken said.

For example, if the governor’s budget passed but oil prices dropped to $50 per barrel for a sustained period, then the state could run as much as a $1 billion deficit, Wilken said.