March 22, 2006
Wednesday

JUNEAU, Alaska - State lawmakers are planning to squirrel away $600 million of this year's projected budget surplus to pay for education and capital projects in future years.

Since the start of the session, Republicans and Democrats alike have called for saving a significant portion of what is now a projected $1.4 billion surplus, a windfall from the recent spike in oil prices.

On Tuesday, they began to carry out that idea when the House Finance Committee laid out a specific plan to set aside the money in its rewrite of a "fast-track" supplemental budget bill Gov. Frank Murkowski introduced in early February.

The fast-track supplemental budget bill covers costs for the current year's budget that were not foreseen when lawmakers approved it last spring, and the Legislature is expected to pass it before it begins work in earnest on next year's spending plan.

Rep. Mike Chenault, the House Finance Committee co-chairman, said the committee attached the savings plan to the supplemental budget to put the money out of reach during regular budget deliberations.

"The intent is simply to get $600 million off the table," said Chenault, a Republican from Kenai. "If we get it off the table and take it out of our hands, we are saving money for future budgets."

The plan is to set aside $300 million in an education fund that the Legislature created last session that is used to hold money for future school spending. The other $300 million would go into a fund administered by the Alaska Housing Finance Corp. that can be tapped to pay for a wide range of capital projects.

Some Democratic lawmakers criticized the plan, saying that it doesn't save money at all.

Sen. Johnny Ellis of Anchorage, who leads the Democratic legislative caucus, said many of his caucus members have floated competing proposals, including putting the money into the state's Constitutional Budget Reserve - a long-term state savings account used to plug budget gaps - or even directly into the Permanent Fund.

"We've made proposals for real savings," Ellis said.

The House Finance Committee's plan is similar in principle to what Murkowski has proposed the Legislature do with the surplus, said Cheryl Frasca, the governor's budget director.

However, Murkowski had asked them to put $565 million in the education fund and to set aside $400 million as a down payment for his idea that the state take a 20 percent ownership share of a natural gas pipeline.

Frasca said the administration was pleased to hear that the Legislature was considering putting the $300 million into a capital-project fund because the money could be used to help pay for a gas pipeline.

"They're not saying it's for a gas pipeline, but we're hopeful that it will be," she said.

For about two years, Conoco Phillips, Exxon Mobil and BP have been negotiating in secret with the Murkowski administration on a contract setting out tax and other state terms that would apply if they choose to build a pipeline to carry North Slope natural gas to the Lower 48.

The governor has said all sides have agreed in principle to the major components of a contract, but the deal is contingent on lawmakers' revamping the state's oil-production tax system. Work on the oil-tax plan is expected to carry on for at least several more weeks.

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