By Tim Bradner
Alaska Journal of Commerce

A package of three major state funding bills has come together as the Legislature continues its fast-paced session aimed at adjournment on April 13, the 90th day of the session.

A bill boosting state funds for schools to over $1 billion a year, House Bill 173, has passed both the state House and Senate and is already on its way to Gov. Sarah Palin for approval.

Senate Bill 72, which would reinstate a community revenue-sharing program, passed the House on March 11. The Senate is expected to quickly agree to the changes made in the House, after which the bill will also go to Palin.

The third major bill, Senate Bill 125, which helps municipalities with public employee pension liability, has passed both the House and Senate and is expected to emerge soon from a House-Senate conference committee where minor issues were being worked out, according to Senate Finance co-chair Sen. Lyman Hoffman, D-Bethel.

In another action, the Senate approved appropriations of $3.6 billion in surplus funds to the state Constitutional Budget Reserve and a statutory budget reserve, two state cash reserve accounts. The appropriations were made in Senate Bill 256, a supplemental appropriations bill that passed the Senate March 5 and is now in the state House.

Resurrection of a community revenue-sharing program is one of Hoffman's major goals for the session, but he said he is concerned that the cost will cut into funds needed for state programs if oil prices decline.

The bill would pay out $60 million a year to municipalities and unincorporated communities and establish a $180 million fund to guarantee three years of payments at $60 million.

As the annual $60 million appropriations are made, the revenue sharing fund is replenished as long as oil prices stay above $60 per barrel. If prices dip, the fund will not be replenished but it will have enough to pay out for three years, giving municipalities advance warning that the funds will be cut off.

The bill helps municipalities with pension obligations by paying enough into the state-managed Public Employee Retirement System fund that the required payment by local governments to support employee pensions, present and past, is 22 percent of the payroll, according to Kathie Wasserman, executive director of the Alaska Municipal League.

Because the future liability has become so large - the combined municipal, school district and state liability tops about $8 billion - some municipalities have been paying as much as 40 percent to 50 percent of their payroll in pension contributions, Wasserman said.

The state stepped up to the plate to help local governments because the liability developed after decisions made by a state investment board, which manages municipal, school and state pension, resulted in underpayments being made over several years, which caused future liabilities to balloon.

In other legislative developments, talks continued between House and Senate leaders and the governor over the Legislature's action to reappropriate funds for capital projects vetoed by the governor last summer in a supplemental spending bill passed by the Senate which is now in the state House.

Palin's vetoes of $100 million worth of local projects from last year's capital projects bill remains a sore spot with lawmakers.

At the March 10 weekly news conference, House Speaker John Harris, R-Valdez, defended the Senate's unusual move of adding some $51 million worth of the projects Palin had vetoed into the supplemental spending bill for fiscal year 2008. Harris also said that Palin assured lawmakers she would not veto again the projects if legislators appropriated the funds for the projects a second time.

The governor's office said that wasn't the case, however. Later that day Russ Kelly, the administration's legislative liaison, said Palin never offered that assurance to lawmakers and remains opposed to including the projects in the supplemental spending bill.

He said Palin expressed her “deep concern” with the bill in a March 5 letter to Senate President Lyda Green. The letter also called the tactic “counterproductive,” adding that the administration's offer to “move past last year's process and focus on achieving a mutually acceptable level of spending for next year has been ignored.”

Kelly said Palin spent 90 minutes with the House leadership March 10, and said they had a good discussion. A second meeting was held with House and Senate leaders March 11.

Sen. Bert Stedman, R-Sitka, said the March 11 meeting with Palin went well. Legislative leaders discussed their work on the FY 2009 capital appropriations bill and described their process of reviewing proposals for spending from “the bottom up,” beginning with the administration's requests for capital projects. Stedman said Palin liked the approach.

Hoffman, however, said the Legislature is still inclined to leave the $51 million in vetoed projects in the supplemental bill.

Harris said the supplemental budget bill would pass in time to force Palin to make veto decisions, as well as also allow the Legislature to save any rejected projects if there is no veto override by adding them to the fiscal 2009 capital projects bill. Such a move would “uphold our constitutional right to appropriate,” Harris added.

While the governor maintains the right to make selective line-item vetoes from appropriations bills, the Legislature is charged with the overall responsibility of writing the budget. What many lawmakers objected to in Palin's vetoes last summer was the way they were done, without consulting legislators or constituent groups who were affected.

One project Palin vetoed last summer that attracted the public's attention is a $10 million appropriation for the Port of Anchorage's long-term expansion, a $100 million-plus project that aims to make the port more efficient in handling general cargo for Southcentral and Interior Alaska.

The governor has suggested including the port in a proposed state general obligation bond issue that would go before voters next fall, but the question of whether the bond issue will pass has created uncertainties in the schedule for the major port construction project.

Legislators are also concerned with the precedent of including a major municipal project - the Port of Anchorage is owned by the municipality of Anchorage - in a state general obligation bonds. That has been done only once before in an emergency action related to a Fairbanks flood control project.

Harris also said some legislators are still offended by the governor's statement last summer, shortly after her vetoes, that some “adult supervision” was needed in the budget process. He called the comment “a slap in the face to some of us who have a lot more experience in public office than the governor does.”

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