Alaska’s 30th Legislature convened for its new
session on Tuesday, with the state’s finances presenting a daunting challenge for the next 90 days.
The spending deficit is projected at around $3.1 billion this year if the budget is left as-is. Agency spending has come to just over 13-percent since FY15, and the budget as a whole has taken a 29-percent cut when capital projects and other funding is considered. Revenue has failed to cover operating expenses since FY13, but has covered an ever-dwindling proportion since. This year the $1.2 billion the state expects to get in revenues would only account for 29-percent of the budget, still a slight improvement over FY16’s 25 percent coverage.
Revenues for the state largely come from its oil production taxes and royalties, which a mix of high prices and high production translated into a high point in 2007. These continued for several years, plunging in the state since 2012 with a drop in both oil and production levels. As a result, state revenues went from over $9 billion that year to current levels.
State spending habits have been slow to respond, and while the government has been drawing on its constitutionally-allotted savings funds to make up the difference, those would be exhausted within little more than a year’s time if spending is left as is. Going into the new session, budget drafts being put forward by Gov. Bill Walker, the Senate’s Republican majority and the House’s bipartisan majority all propose tapping into Permanent Fund earnings in some capacity.
On the Senate Finance Committee, Sen. Mike Dunleavy (R-District E) has proposed a plan to use half of the PFD earnings fund for essential state services, with the other half going to residents as previous dividend payments have. While offering no new taxes, the plan proposes $300 million in cuts for each of the next three fiscal years, and a $200 million cut for FY21. Savings would also be proposed by moving the state to a biennial budget process.
“The cornerstone of the approach is a revised constitutional appropriation limit to curb the growth of government which, if passed by the Legislature, would go before the voters in the next general election for approval,” his office explains in a January 10 release.
On the House side, Rep. Dan Ortiz (I-District 36) plans to support a PFD restructure plan being put together by co-chair of the House Finance Committee Paul Seaton (R-District 35), which would also include a statewide income tax.
“I’m interested in looking at that,” Ortiz said during a visit to Wrangell last week. Seaton has in past sessions supported a similar proposal, and has subsequently joined the coalition majority this year. “(Seaton)’s got a good hand on where the state needs to go.”
Whether the Senate and House majorities will be able to reach a copromissory
position on the budget will be the question this session. But compromise will be needed, not only to balance the state’s budget but also to curb expected job losses and related outmigration.
“The rippling effect is real,” said Ortiz.
However, he finds no problem working with Senate
counterpart Bert Stedman (R-District R) in the coming session. “During my first
term I was down in his office on a regular basis,” the Ketchikan representative commented. “We’re on board to address the issues. I think we have the commitment and resolve to get it done. So I’m looking forward to the opportunity.”
This year as sub-finance chair for Fish and Game, Ortiz said he would also be advocating to get the Department of Fish and Game “adequate resources” to manage fisheries and gather data. Over the past several years, departmental funding has been cut by over a quarter and he felt this was having an adverse effect on its program.
“I think this is one area where I disagree with the governor’s budget,” he said. “We’re getting to the point where we’re clearly seeing certain fisheries, and certain studies that have not been done that, in the end, have caused a potential foregone catch,” which in turn means fewer receipts for fishermen and processors, and greater losses than the cuts’ intended savings.
He will also be presenting in the second round of bill filings two different items supporting mariculture enhancement (see Mariculture article), which would further bolster that industry. One of the future bills would make it easier for shellfish hatcheries to gain access to loan funds through the state of Alaska, encouraging development.
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