Boats moored at Wrangell's Heritage Harbor in January. The Harbor Department is waiting on tenterhooks for a capital budget to be adopted by the Alaska Legislature that would include money for a match to replace facilities at Shoemaker Bay Harbor.
Just averting a state government shutdown, Gov. Bill Walker signed into law an operating budget for the new fiscal year, which began July 1.
The budget follows extensive negotiations between the largely Democratic coalition-led House and Republican Senate, whose majorities each offered differing plans on how to address Alaska's multibillion-dollar spending deficit.
"The operating budget was an example of compromise, and an example of both sides not giving in and not exactly getting what they wanted," commented Rep. Dan Ortiz (I-District 36).
He was pleased with some aspects of the budget, with items for the fishing industry largely protected and no reductions to the base student allocation formula in terms of education. "I felt good about it," Ortiz commented.
The budget reflects further cuts to agency and programming spending. In a release accompanying its signing, Walker pointed out the $4,200,000,000 operating budget is 23 percent lower than when he took office two years ago. When counting capital and other expenditures, spending in the state has been reduced by 44 percent since 2013.
Economically, these adjustments have translated into a reduction of 2,500 state positions through cuts and attrition since 2015, with 400 more such jobs expected to be eliminated by this December. In addition, most state employees will be required to take at least two unpaid furlough days while contributing more to health care coverage. Automatic cost-of-living increases have likewise been eliminated from all negotiated contracts, with step increases to non-unionized employees frozen as of July 1. The governor himself has also taken a one-third reduction in salary.
"We have reduced state spending by more than $1.7 billion, and will continue to seek efficiencies and contain costs," Walker said in a statement.
However, Walker's budget still leaves a substantial deficit in terms of spending, potentially drawing $2.3 billion from the Constitutional Budget Reserve to close a multibillion-dollar annual deficit. Cutting the remaining fund by more than half, Ortiz pointed out the Legislature's options for resolving its deficits has been drastically limited.
"That option is not there next year at this point," he commented. "What we haven't done is we still haven't come up with a fiscal plan."
While time remains in the current special session – the second called so far this year – a resolution on House Bill 111 ending or else reconfiguring tax subsidies for oil production could be reached. Versions differ between the House and Senate, which have yet to be reconciled between the two chambers.
Keeping Wrangell on pins and needles will be what version of the capital budget legislators eventually adopt. Hanging in the balance will be $5 million in the Department of Transportation's harbor facilities budget, the amount needed to fund a match for a proposed update to Shoemaker Bay Harbor's aging float network.
As happened with last year's budget, if a lesser amount than that is approved for the program, Wrangell's project will get bumped in favor of a smaller project. Since being introduced in Walker's budget proposal last winter, latest versions of the capital budget have still maintained the $5 million sum, so there is room for some cautious optimism.
"We haven't heard we're getting thrown out of it," offered Greg Meissner, Wrangell's harbormaster. "We're just waiting."
If approved, the city will need to draw from its Harbor Department savings and sell bonds in order to reach an approximate $5.7 million match needed for the project. Depending on how long the bonding process takes, Meissner was hopeful contractors could be signed on to the project by the coming winter.
With a September deadline for the budget in mind, Ortiz expected an additional special session may be called sometime in August to deal with capital expenditures. Looking at the wider scope of state spending, however, Ortiz wanted to emphasize the need for new revenue sources for Alaska's services. Options such as a statewide income tax
and reconfiguring of Permanent Fund earnings were explored in various bills by each
legislative chamber, but in the end a settlement was never reached.
With congressional reserves looking to soon be depleted, Ortiz felt a more balanced fiscal plan needed to be adopted, and quickly. "We can't just do what we have been doing."
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