House Speaker Mike Chenault said in the House leadership's Monday briefing that the operating budget should be in conference committee by Wednesday or Thursday and that work is underway on the capital budget in the Finance committee, which is coordinating the effort with the Senate Finance Committee and the governor. There are no significant differences between the House and Senate versions of the operating budget, and so reconciliation of the two should come quickly. The capital budget is expected to be "bare bones" with only the required state match to federal programs, a few critical state infrastructure items, and the federal stimulus projects.

The Legislature's "24-hour" rule goes into effect Thursday, which means that committees will only be required to publish notice of bills they will work on 24 hours ahead of a meeting instead of five days in advance, which is now required. Committees will start to shut down work at the end of this week, except for the Finance committees.

In the Monday briefing the Speaker said he doesn't see a lot that needs to pass this year except the operating and capital budgets, which are required. In a regular Monday morning briefing session Chenault said a bill providing a financial backstop to the state student loan corporation has a priority because without it the student loan corporation won't be able to sell bonds to fund higher education loans for the 2010-2011 school year. The Speaker said he hopes a bill will pass that expands the authority of the Alaska Natural Development Authority. The legislation has been proposed by the governor. The authority's enabling statute requires it to work on a pipeline and LNG project at Valdez and on getting gas to Southcentral Alaska. The bill would expand its authority to the supply of gas to any Alaska community.

A surprise at the Monday April 6 briefing was the announcement by Rep. Clarisse Millett, cochair of the House Energy Committee, that legislation will be introduced creating a new state Department of Energy to bring together energy functions now spread through many state agencies, such as the Alaska Energy Authority, Alaska House Finance Corporation and the Alaska Natural Gas Development Authority. There is no expectation that the proposal would be adopted in the days remaining in the 2009 session, but that it would be the subject to further work, including an "energy summit" between sessions. In a press release issued Monday, Gov. Palin endorsed the proposal.

Several bills will be held for interim work including the governor's proposal for a restructuring of the Southcentral-Interior "railbelt" utilities through the creation of a jointly owned entity that would fund construction of new generation capacity. Some hearings have been held on the proposal, but legislators say it came in too late during the session and still does not have the uniform support of the six electric utilities in the railbelt. Power plants in the region are aging and need replacement, and some form of a jointly owned entity would allow the utilities to work together in financing new construction.

The controversy over the federal stimulus funding seems to be waning. The governor has said she supports accepting mainly the capital items and an expansion of Medicaid funding through the stimulus program, amounting to about two-thirds of the $900 million-plus available to Alaska. However, the governor said she does not support accepting the remaining one-third, which is mostly operating programs, much of it for education, because of "strings" attached that would affect the state budget when federal dollars run out. Legislative leaders, however, say their investigation shows little or no "strings" attached, and are acting on resolutions to accept all funds available. The governor's views on this recently are unknown but she may have the last say in this through her veto power of items in appropriation bills (the Legislature must put the stimulus funding in an appropriation bill). Even if the Legislature were to override the vetoes, the governor must still instruct state agencies to apply for the funds.

In a longer-term perspective, it won't be known until this summer how much of a draw the state will have to take from the Constitutional Budget Reserve to cover deficits in the current fiscal year, FY 2009, and the next Fiscal Year, 2010, which begins July 1. The expectation at this point is that about $2.5 billion to $2.7 billion will be needed to cover the combined deficit, a significant portion of the approximate $6.6 billion now in the reserve. Alaska North Slope crude oil prices have ranged between $45 per barrel to $50 per barrel in recent weeks, and as of Monday the average price for the 2009 fiscal year so far was $69.15 per barrel compared with the Department of Revenue's estimate in December of $77.66 per barrel, considered the price needed for revenues in the current budget year to cover spending.

Mike and Tim Bradner publish the Legislative Digest and the Alaska Economic Report. For more information, contact timbradner@pobox.alaska.net