Walker renews push for Fund earnings to fill deficit

  • By ELWOOD BREHMER
  • Saturday, December 17, 2016 8:56pm
  • News

Gov. Bill Walker called for continued budget cuts, more state wage freezes, fuel tax increases and again proposed using Permanent Fund income to shrink Alaska’s $3 billion-plus annual deficit in his 2018 fiscal year budget package released Thursday.

The administration’s $4.21 billion fiscal 2018 operating budget plan would modestly cut unrestricted General Fund, or UGF, spending by $47 million over the current, 2017 fiscal year budget.

However, the 2017 budget settled at $4.26 billion only after Walker vetoed $190 million from the $4.45 billion budget passed by the Legislature — the governor’s reaction to the Legislature turning down most of his broad deficit reduction plan.

In a press release accompanying the budget documents, Walker emphasized that the heavily scrutinized UGF portion of the operating budget is down 23 percent during his term.

“We have closed dozens of state facilities across Alaska, impacting services Alaskans have grown accustomed to receiving,” Walker said. “But Alaskans are increasingly looking for budget stability to protect Alaska’s economy. We can’t cut our way to prosperity. Since 2013, we have cut state spending by 44 percent. To fund services Alaskans rely on, it’s critical to discuss new revenue. We look forward to working with the Legislature to pass a sustainable fiscal plan during the upcoming session.”

The governor is also taking a voluntary one-third pay cut from his $145,000 annual salary that is set in law to “lead by example,” he said further in a statement from his office.

Office of Management and Budget Director Pat Pitney said during a Friday budget presentation that actual agency spending is down $123 million in the budget proposal, but those cuts are largely offset by $76 million of growth to state retirement funds, debt service and other annual obligations.

The base student allocation, or BSA, education funding formula that drives much of the state Department of Education budget, which is the largest single UGF spend in the operating budget, stayed the same as 2017, according to Pitney.

Walker again proposed legislation to draw 5.25 percent of the overall Permanent Fund value from the Fund’s Earnings Reserve Account to help pay for government services. The bill is very similar to what passed the Senate last spring but failed in the House. It would provide about $1.8 billion for agency operations and set aside enough for future Permanent Fund dividends in the $1,000 per Alaskan range.

The administration is also seeking to freeze pay raises for non-union state employees, which would likely save about $10 million over the next two years.

State employment is down by about 2,500 employees since the Walker administration took office, Pitney said and another 400 jobs are expected to be cut in the coming year. The administration feels there is room to trim about another 200 more jobs after that, she added.

“The level of state employment today is the same as 2002,” Pitney said, and the additional targeted cuts would result in employment levels not seen since the late 1990s.

Travel restrictions instituted by the administration about a year ago also saved the state about $8 million, according to Pitney.

“We’re keeping the cost pressure on,” she said. “It really comes down to continuous cost containment on a daily basis.”

Legislative leaders focused more on what the governor did not include in his than what was rolled out Thursday.

“I am disappointed the administration did not take their job more seriously and identify areas that should be cut, trimmed or eliminated,” said Finance Committee co-chair Sen. Anna MacKinnon, R-Eagle River.

MacKinnon said Senate Finance would continue the work it did last year to “make our state government run more efficiently and effectively for the people of Alaska.”

Incoming House Speaker Rep. Bryce Edgmon, D-Dillingham, acknowledged the governor’s willingness “to address the fiscal challenge head on,” while soon-to-be House Rules chair Anchorage Republican Rep. Gabrielle LeDoux echoed criticisms heard from Senate Democrats about the omnipresent oil and gas tax credit issue.

“The governor has started the ball rolling, but it’s now time for the members of the House and Senate to get to work to come up with responsible measures to fill the budget gap,” LeDoux said. “It’s my hope that fixing our flawed system of subsidizing the oil and gas industry with large tax credits will be part of the fiscal solution.

“I support efforts to increase oil and gas production in Alaska; but we can’t let those subsidies overwhelm our budget and jeopardize essential state services like public education and public safety.”

The governor’s budget includes $76 million — the formulaic statutory minimum — to pay refundable oil and gas tax credits. The state’s obligation at the end of fiscal 2018, however, is pegged to be nearly $1 billion.

Walker has said he wants to pay down the obligation as part of an overarching fiscal solution. He vetoed $430 million in credit payments approved by the Legislature last year saying the state could not afford to make the additional payments out of dwindling savings without also solving the structural budget problems.

Walker’s fuel tax bill would significantly raise taxes on virtually all taxable fuels over two years. On July 1, 2017, the tax on highway-use gasoline and diesel would double from 8 cents per gallon — currently the lowest in the nation — to 16 cents. It would go up again in July 2018 to 24 cents per gallon. The national average is 25 cents per gallon, according to the administration.

As proposed, the fuel tax increases would generate $40.3 million more in fiscal 2017 and more than $80 million in subsequent years. It would also shift fuel tax revenues to dedicated sub-accounts to encourage the money be reinvested in transportation maintenance.

The fuel tax bill did not move far in the Legislature last session, but drew the most support of all the industry and use tax increases that the administration floated.

The governor chose not to propose other broad based personal and industry taxes with his budget as he did last year, but given his budget and revenue bills released Thursday would still leave an $890 million budget gap, more revenue measures are likely to come.

Pitney acknowledged a change in strategy after the blanket approach proved unsuccessful.

“What we don’t want to do is take up time with the 12 (revenue generating) bills we submitted last year,” she said.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

More in News

In this Sept. 21, 2017, file photo, former vice presidential candidate Sarah Palin speaks at a rally in Montgomery, Ala. Palin is on the verge of making new headlines in a legal battle with The New York Times. A defamation lawsuit against the Times, brought by the brash former Alaska governor in 2017, is set to go to trial starting Monday, Jan. 24, 2022 in federal court in Manhattan. (AP Photo/Brynn Anderson, File)
Palin COVID-19 tests delay libel trial against NY Times

Palin claims the Times damaged her reputation with an opinion piece penned by its editorial board

COVID-19. (Image courtesy CDC)
COVID-19 at all-time high statewide

The state reported 5,759 new cases sequenced from Jan. 21-23

Volunteers serve food during Project Homeless Connect on Jan. 25, 2018, at the Soldotna Regional Sports Complex in Soldotna, Alaska. (Erin Thompson/Peninsula Clarion file)
Project Homeless Connect to provide services, support on Wednesday

The event will be held at the Soldotna Sports Complex on Wednesday from 9 a.m. to 3 p.m.

The logo for the Kenai Peninsula Borough School District is displayed inside the George A. Navarre Borough Admin Building on Thursday, July 22, 2021 in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Schools aim for ‘business as usual’ as cases reach new highs

On Monday, there were 14 staff members and 69 students self-isolating with the virus

Triumvirate Theatre is seen on Monday, Feb. 22, 2021 in Nikiski, Alaska. The building burned in a fire on Feb. 20. (Ashlyn O’Hara/Peninsula Clarion)
Triumvirate construction on hold as theater seeks additional funding

The new theater is projected to cost around $4.7 million.

The logo for the Kenai Peninsula Borough School District is displayed inside the George A. Navarre Borough Admin Building on Thursday, July 22, 2021 in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
KPBSD schools to start 2 hours late Tuesday

Due to weather, all but 4 schools will be delayed

Data from the state of Alaska show a steep increase in COVID-19 cases in January 2022. (Department of Health and Social Services)
Omicron drives COVID spike in Alaska as officials point to decreasing cases in eastern US

On Friday, the seven-day average number of daily cases skyrocketed to 2,234.6 per 100,000 people

Dana Zigmund/Juneau Empire
Dan Blanchard, CEO of UnCruise Adventures, stands in front of a ship on May 14, 2021.
Smooth sailing for the 2022 season?

Cautious optimism reigns, but operators say it’s too early to tell.

Former Alaska Assistant Attorney General Elizabeth Bakalar speaks a news conference on Jan. 10, 2019, in Anchorage, Alaska, after she sued the state. A federal judge on Thursday, Jan. 20, 2022, ruled that Bakalar was wrongfully terminated by the then-new administration of Alaska Gov. Mike Dunleavy for violating her freedom of speech rights. (AP File Photo/Mark Thiessen, File)
Judge sides with attorney who alleged wrongful firing

Alaska judge says the firing violated free speech and associational rights under the U.S. and state constitutions.

Most Read