Capital budget nearly $2B following vetoes

At just a hair less than $2 billion, the 2022 fiscal year capital budget is the largest Alaska has seen in years even after Gov. Mike Dunleavy vetoed more than $325 million from it.

Much of what Dunleavy vetoed was federal highway funding but some of the nixed projects were also items he previously suggested.

According to the administration, the $1.97 billion capital budget is the largest since the state’s fiscal outlook drastically deteriorated with the fall of oil prices seven years ago. Nearly $1.6 billion of that is federal money, most of which is directed to highway and airport projects, as is the norm, but the $239.7 million of unrestricted general funds is almost exactly double the $120.3 million spent last year.

More than $2 billion in general funds alone were appropriated in annual capital budgets at the peak of state spending.

“This capital budget will put people to work but also build Alaska and fix infrastructure,” Dunleavy said during a July 1 press briefing on the budget.

Of his vetoes, which included some or all of 68 items totaling more than $1.1 billion in spending in the combined capital and operating budget bill, the largest and undoubtedly most contentious was $682.4 million for Permanent Fund dividends in an effort to ultimately force a larger amount.

The second-largest line item cut was $150 million in federal highway project acceleration funds for the Department of Transportation and Public Facilities. The governor similarly vetoed a $100 million federal highway project contingency appropriation down to $30 million.

In response to questions sent to DOT officials about what the money would be used for, Dunleavy spokesman Corey Young wrote that the governor recognized the Legislature’s skepticism in regards to large, block appropriations of federal money to agencies — an issue that cropped up last year with the CARES Act — and reduced the appropriations to DOT as a result.

“The decision to significantly restrict DOT’s contingency and project acceleration funds is a show of good faith to the Legislature that his departments will not use federal funding tools to subvert the intent of the Alaskan appropriating authority,” Young wrote.

However, the federal appropriations were added to the budget by the Legislature during the session based on a review of the original capital budget bill the governor submitted in January.

According to the House majority caucus, some of the $220 million would have gone toward regional or smaller projects such as clearing ice roads between rural communities.

When it comes to state money, Dunleavy vetoed a $10 million grant to the Alaska Travel Industry Association for statewide tourism marketing.

ATIA is the state’s primary travel trade association.

In April, the governor’s office announced a national tourism marketing campaign aimed at recruiting independent travelers to the state at a time when it appeared significant volumes of cruise passengers were unlikely to reach Alaska this year.

ATIA CEO Sarah Leonard wrote in an emailed statement that the efforts by both the trade group and the governor’s office are beginning to pay off, but the funding cut is likely to kill that momentum and there will be no funding to market Alaska in 2022.

“Alaska competes with other domestic destinations to attract visitors who have an ever-increasing, pent-up demand for travel. Next year, international destinations will most likely be back in the marketplace, offering even greater competition,” Leonard said.

“Without state allocated marketing funds, ATIA is on hold in our efforts to help with the state’s economic recovery.”

Dunleavy proposed a $5 million grant to ATIA in his original budget plan.

The governor’s capital budget vetoes also included erasing a $21.6 million general fund appropriation to the Major School Maintenance Grant Fund as well as $13.2 million for a trail link between Seward and Fairbanks. A $12.5 million appropriation for upgrades to the Alaska Vocational Technical Center, or AVTEC, was also vetoed.

Each of those vetoes were to items the governor also originally proposed in his $356 million general obligation bond proposal.

While the Legislature did not pass the bond bill this year with some lawmakers uneasy about taking on debt with large sums of federal money available, it funded some of the projects at reduced levels, such as the school maintenance and AVTEC upgrades.

The trail grant matched the administration’s original request.

Elwood Brehmer can be reached at [email protected].

07/07/2021 - 9:44am