By Tim Bradner
Alaska Journal of Commerce

Gov. Sarah Palin vetoed $265 million from the fiscal year 2009 state capital budget and $2.6 million from the operating budget May 23, the final day on which she could act to trim spending through vetoes.

After redlining certain appropriations, the governor signed the state operating and capital budgets into law. Palin also approved a bill placing a $315 million general obligation bond issue on the state election ballot in November.

State legislators complained that Palin did not communicate with them or groups that were affected by the vetoes. Sen. Bert Stedman, R-Sitka, who co-chairs the Senate Finance Committee, said he was informed about the governor's action at 7:30 p.m. the night before the vetoes were released.

John MacKinnon, executive director of the Associated General Contractors of Alaska, a nonprofit construction trade association, said he's more or less pleased with the budget cuts.

“Sure there were some highway improvement projects that didn't make it into the budget, but I want to focus on the positive here,” he said. “We want to increase the number of jobs every year so we're ready for a gas line in eight, 10, 12 years. We need to increase the capital budget so we have work for all those folks. In that respect, I don't think the vetoes were bad at all. I actually think (the governor) did a great job.”

The fiscal year 2009 operating budget totals $11.1 billion of state and federal funds. The capital budget, Senate Bill 221, totals $3.6 billion in state and federal funds.

The governor also approved operating and capital budget bills for state mental health programs, which are required to be in separate budget bills.

Palin's vetoes of the capital budget were small reductions scattered through the bill and mostly from appropriations to community groups and schools that were part of the bill designated for lawmakers' home districts. In many cases part of the appropriation was allowed.

Two significant sets of vetoes were electrical utility infrastructure appropriations to Homer Electric Association, Copper Valley Electric Association and Matanuska Electric Association that were appropriated from the Railbelt Energy Fund, a reserve being held for Railbelt energy projects.

Palin vetoed appropriations from the Railbelt Energy Fund last year also. The governor is not allowing utilities access to the fund until they agree on a plan to cooperate in operations and planning for new power plants.

Among the governor's 360 vetoes were a $25 million MEA transmission line to Point MacKenzie prison and a $12.5 HEA transmission system upgrade.

Palin also vetoed funds appropriated from the new $50 per passenger cruise ship tax that legislators approved for dock and harbor improvements in several coastal communities.

Stedman, who was in charge of development of the capital budget in the senate, said this was surprising since the administration had asked legislators during the 2008 session to appropriate funds from the cruise tax revenues to marine-related improvements in communities where cruise ships dock.

The state Department of Law had recommended spending the money on infrastructure that provided services to cruise ships, along with other marine commerce, to bolster the state's defense of the cruise tax law if it were challenged legally.

Major cruise ship operations have reserved their option to sue to overturn the tax, arguing that it is unconstitutional as a state tax on interstate commerce. If revenues from the tax are spent on improvements that benefit the taxpayers, however, the state will have a stronger defense, state attorneys have said.

Several coastal communities, which have their own municipal cruise passenger taxes, are careful to spend the revenue on infrastructure projects and often work with the cruise lines in planning the improvements.

Journal reporter Carly Horton

contributed to this story.

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