Peggy's Corner of the House

Hello and welcome back to Peggy’s Corner of the House!

The House passed the state-operating budget after vigorous debate this past week. There has been tremendous work done on the budget since session started -many long days and nights have been spent trying to accomplish this in the very short time period that we are allotted. I actually wish we were back to a 120-day session.

Over the last ten years, the General Fund (GF) portion of the departments’ operating budgets has grown an average of 6.5% each year. This 6.5% growth is unsustainable. Governor Parnell recognized it and the budget he introduced this year was just a small 1.3% growth for FY14.

When we convened in January, the Department of Revenues’ projections had changed and in order to balance our current FY13 budget (that ends June 30), it was projected to take an additional $410,000,000.00. This amount we have to take out of our savings. We were also told that if we continued to grow the FY14 budget at that same 6.5% growth rate, we would have to dig into our savings by over $900,000,000.00 (just to balance).

Because of the continuing decline in oil production and the uncertainty of the price of oil, the Legislature knows that the continual rise of the state’s budget cannot be sustained and we cannot keep dipping into our savings.

The operational budget that the House just passed holds the line on growth and is $4,250,000.00 below last years’ budget. Next year will be even harder. We will have to go into all of the budgets and actually make cuts; this year the cuts we made were only to the governors’ requested increases.

The Department of Education receives the largest portion of the GF budget at 25.8%. Of that, $1,226,000,000.00 goes strictly to K-12 education and student transportation. The second largest recipient of General Funds is the Department of Health and Social Services. Their total is just under 25.8%. This includes Medicaid at $678,800,000.00, which consists of funds that the State of Alaska is required to match. Between these two agencies, (Education and H&SS), 51.6% of our GF monies are spent. These agencies are not ones that we like to cut.

The University of Alaska GF budget total is 10.3%. We will deposit $633,800,000.00 (9.8%) into the retirement systems to pay down unfunded liability, and Capitalization Funds comprise another 9% of our GF budget.

Department of Transportation is 5.4% of the GF budget and the ferry system is 46% of the DOT total. Rail belt legislators are not happy with the high amount that goes specifically to our ferry system. The total that was spent towards the ferry just 12 years ago has doubled.

Department of Corrections totals nearly 5%. We also have to pay our Debt Service on bonds and other obligations, which equates to another 3.5%.

The 8 departments that I have mentioned equal 82.9% of our GF operating budget, leaving very little for all the other state departments that we are still charged with funding.

That sums up the operating budget. Is it perfect? No! I don’t believe any budget ever is. It is an expenditure plan that reflects policy direction of slowing down the growth of state government. Every House legislator had a part in this budgeting process. The Senate will undoubtedly make changes to the budget we passed. That is the nature of how our bicameral Legislature works and rightly so. After the Senate makes their changes, both the House and Senate will meet in a special committee and work out a compromise on the differences. In the end, both bodies will vote on the budget and we will finally have an operating budget for the next fiscal year.

We now have only 30 days left before session ends. The capitol budget plus many very important bills all need to be reviewed. I do hope we are able to accomplish all of this in our remaining days.