Budget director: proposed budget brings Alaska to 2011 spending level

The Alaska Office of Management and Budget released Gov. Bill Walker’s proposed fiscal 2018 budget on Dec. 15, 2016. On Tuesday, Office of Management and Budget Director Pat Pitney presented this budget — meant to take effect July 1, 2017 — and answered questions about it at a joint Kenai and Soldotna Chamber of Commerce luncheon at the Soldotna Regional Sports Complex.

The Legislature will debate, amend, and vote on the governor’s budget proposal in the legislative session due to start Jan. 17. According to Pitney, the budget undoes several years’ worth of spending growth.

Pitney said the operating funds budgeted for state services are near the level that was spent in 2011, though this comparison is not adjusted for the inflation and population growth that have occurred since then.

“If you adjust it, you’re way back,” Pitney said.

The budget also reduces the number of state employees to a level similar to what it was in 2002, according to Pitney.

“Some big changes are already made,” Pitney said. “And each change now is harder and harder. Once you drop that first thousand people, the next thousand people is harder, and the next thousand, and the next thousand is even harder. We do expect to be down another 400 by this time next year, based on programs we have in progress.”

As for the capital budget that funds state and local infrastructure products, Pitney said “I call it zero.”

“It’s $100 million, and all that does is make sure we meet our federal match requirements for transportation, sewer and water, housing, and a little bit of energy,” Pitney said. Federal funds for infrastructure products are usually contingent on spending from state and local governments.

On the revenue side of the budget, Walker included two revenue proposals with his budget package, which were sent to leaders of the House and Senate when the budget was released. One is a plan to draw funds annually from the permanent fund earnings reserve, similar to a plan that Walker proposed to last year’s Legislature, and which passed the Senate but died in the House Finance Committee. The other would raise tax rates on motor vehicle fuel.

However, Pitney said that if these measures are passed — and if oil prices rise to $60 per barrel — the present budget wouldn’t be balanced without an additional $600 million to $700 million. These would likely have to be produced by taxes, Pitney said — either corporate tax, sales taxes, or an income tax.

Responding to a question about Alaska’s state spending per capita — as of fiscal 2015 the highest in the nation at $18,196 for each citizen, according to the Kaiser Family Foundation — Pitney said Alaska’s history left the state with many responsibilities that are elsewhere handled by local governments.

“When we became a state we did not have strong local government,” Pitney said. “When most other places became states, they had strong communities before they became a state. So we service a state court system, and most places have a county court system as well as a state court system. We have a (Alaska State) Trooper component that stretches much deeper. We have a prison system where most places have local jails. … We pay communities to have local jails. And as a state we pay for about 75 percent to 80 percent of public education from the state level. On average, it’s less than 60 percent from other states.”

The per capita spending figure also includes the permanent fund dividend.

Pitney’s presentation listed funds that the central Kenai peninsula’s local governments receive from the state, including $81 million in school funding, $3.7 million in Health and Social Services grants, $2.2 million to foster care providers, and $4.1 million in Medicaid payments.

Other benefits Pitney listed but didn’t quantify include those for child-care, public assistance, and seniors, as well as funding for juvenile corrections.

Reach Ben Boettger at ben.boettger@peninsulaclarion.com.

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