Capital budget sliced to $80M in UGF; federal match raises total to $1.5B

Just when it appeared Alaska’s capital budget couldn’t get smaller, the Senate Finance Committee found ways to cut state further.

The committee version of the 2017 fiscal year capital budget, introduced April 11, contains just $79.7 million in new unrestricted general funds, which is more than $100 million less than Gov. Bill Walker’s original capital budget request.

Combined with an expected $1.3 billion in federal matching funds, the capital budget totals about $1.52 billion.

Staff for Finance co-chair Sen. Anna MacKinnon, R-Eagle River, said during a committee meeting that the budget attempts to capture and reappropriate unspent funds from previous capital appropriations to minimize the General Fund outlay in this year’s budget.

“We have done everything — working with legislative finance and our team — to be able to place out into Alaska projects that will help sustain the items that we have, that we’ve invested in, but it is a reduced capital budget,” MacKinnon said.

More than $20 million of the state’s match for Federal Highway Administration funding, for example, is a reappropriation of lapsing funds from projects funded in prior years, according to MacKinnon staffer Laura Cramer.

A plan to issue general obligation bonds for up to $500 million in capital projects over the next two years was floated by the administration late last fall and initially had a positive reception from legislators but fell apart as the state’s fiscal situation has continued to worsen and the appetite for taking on more debt was lost.

The state’s projected 2016 fiscal year deficit increased from about $3.5 billion to $4.1 billion as oil prices fell lower than expected over the winter.

The bond package could have funded many millions of dollars still needed for the University of Alaska Fairbanks engineering building, the Matanuska-Susitna Borough’s rail extension to Port MacKenzie and the Port of Anchorage Modernization Project, all of which are unfinished and unaddressed in the budget.

The Senate Finance capital budget is still expected to capture more than $1.3 billion in federal matching funds primarily for highway and airport projects.

Cut from the governor’s request was $7 million for the Kivalina School replacement, a project that received about $40 million last year, as well as $8 million for Department of Transportation and $10 million for University of Alaska deferred maintenance projects.

Cramer said the funding for DOT and university was eliminated because each had unspent funds from previous deferred maintenance appropriations.

The University of Alaska estimates its total deferred maintenance bill to be roughly $700 million for its 400 or so facilities statewide.

Nearly $11.3 million of general funds was also removed for school boiler replacements and energy efficiency upgrades in Kake, Petersburg and the Bristol Bay School District because those projects qualify for a public building energy efficiency improvement low-interest loan program through the Alaska Housing Finance Corp.

The budget includes intent language directing school project proponents to determine if their given projects qualify for the loan program that has been in place for several years but has not been used because state grants have largely been available previously.

The committee, through the capital budget bill, is also asking DOT to provide the House and Senate Finance committees with an additional list of highway projects that qualify for up to $170 million of federal funding beyond the state’s typical federal aid level for the 2018 fiscal year budget. That money went was not used by other states and it could be available for repurpose in Alaska if matched with state funds.

The one notable addition to the capital budget is $32.5 million line item to pay for the Legislature’s tentative purchase of the Anchorage Legislative Information Office building. The money comes from the Capital Income Fund, not from the unrestricted General Fund.

After months of debate over whether to break the $3.3 million per year lease for the Anchorage offices and move elsewhere, the Legislative Council voted March 31 to buy the building for $32.5 million and hopefully end what had become a prolonged melodrama and self-induced political headache. The building owner has tentatively agreed to the purchase price pending the details of the deal.

AEA project funding

The Senate Finance capital bill would appropriate about $2.7 million to the Alaska Energy Authority for its rural Bulk Fuel and Power System Upgrade programs with unspent earnings from the Power Cost Equalization Fund administered by the authority.

Repurposing the excess earnings from the endowment-style PCE Fund, which subsidizes expensive diesel-generated power costs for rural residents, follows the intent of Senate Bill 196 that would direct unspent PCE money to support AEA’s popular Renewable Energy Fund grant program and other capital project programs the authority manages.

The Renewable Energy Fund, which supports rural energy infrastructure projects, has historically been paid for with direct General Fund appropriations. A $5 million request was cut out of the governor’s amended fiscal year 2017 budget.

Introduced by Finance Committee member Sen. Lyman Hoffman, D-Bethel, the bill passed the Senate on April 13.

The $970 million PCE Fund often earns more in investment returns than the roughly $30 million to $40 million it has paid out in subsidies each year, leaving it with excess earnings available for appropriation.

SB 196 would cap the annual power cost assistance payout at $30 million and the rural energy program payout at $25 million, while lowering the maximum annual PCE payout from 7 percent of the fund balance to 5 percent.

Some reconciliation with the House’s version of the operating budget will likely be needed if SB 196 passes and is signed by the governor because the current House budget diverts $24.7 million of excess PCE money to one-time fund part of the University of Alaska budget.


Elwood Brehmer can be reached at [email protected].


04/13/2016 - 3:28pm