Savings tapped to cover $3.9 billion shortfall

JUNEAU — What legislators are proudly calling the smallest capital budget since 2001 is headed to the House of Representatives.

After a brief session Saturday morning, the Alaska Senate signed off on a budget of $1.5 billion, the lion’s share of which — $1.27 billion — will come from federal sources. The budget includes just $231 million in state money, much of it as matching funds for garner federal dollars.

The state prepares a number of budgets each year, but the two big ones people watch are the capital budget and the operating budget. The former pays for projects like new roads, schools and airports. The latter pays day-to-day costs of various state departments.

This year, legislators have cut about $861 million between the two budgets.

Gov. Bill Walker’s capital budget was described as “bare bones,” but the Senate trimmed another $40 million.

Recent capital budgets spent heavily in the Mat-Su on projects such as the Point MacKenzie rail extension and the Bogard Road extension.

This year, that list is short. Just two projects in Mat-Su: $50 million to continue work upgrading the Parks Highway, and $1.3 million for the Talkeenta Airport.

Anna MacKinnon, R-Eagle River — who, as chair of the Senate Finance Committee, took the lead for a lot of the budget process — said oil prices were the driving factor behind the cuts. She said that the state will have to take $3.9 billion from savings this year to cover the budget and, based on $66-a-barrel oil prices, would need to pull $3.9 billion more out next year. But even $66 could be overly optimistic.

“The price of oil (last week) ranged between $50 and $58,” MacKinnon said. “That would be a significant additional shortfall.”

The Senate also had to take an additional vote to pull money from savings to cover the shortfall. Sen. Bill Wielechowski, D-Anchorage, took that opportunity to ask just how much the state intended to dip into its reserves.

MacKinnon’s answer: she doesn’t know. That number will depend on oil prices and on what happens with the budgets as the Legislature continues its work. The budgets are heading to the House of Representatives and then, likely, to a conference committee to settle differences between the House and Senate versions.

“My understanding is that based on the spring 2015 revenue forecasts … this will be roughly an $8 billion draw, and I’m just wondering if the Finance co-chair can correct that number,” Wielechoswki asked.

“That is one possible solution,” MacKinnon replied.

Wielechowski and three other Democrats — Berta Gardner and Johnny Ellis of Anchorage, and Donny Olson of Nome, were the only senators to vote against the capital budget. Gardner said she was voting against it because the budget didn’t realize additional savings.

Wielechowski and Gardner proposed two amendments that would have clawed back funds that had been handed over to projects but not yet spent. Gardner’s would have taken $19.3 million from the controversial U-Med Access Road in Anchorage, Wielechowski’s would have taken $20 million set to be spent on the Point MacKenzie rail extension. Both amendments failed.

MacKinnon called their proposals a “noble effort,” but since the money had already been handed over, she said, Gov. Walker should look at those projects, not the Legislature.

“Through his administration and the process that they use, they need to take months to make sure that we are meeting our commitments,” she said. “It is under his authority and power that he might try to change those projects.”

Contact Andrew Wellner at andrew.wellner@frontiersman.com.