(SitNews) Ketchikan, Alaska - Governor Sean Parnell unveiled his FY 2015 budget this week, proposing $1.3 billion less in general fund spending than the current year and 150 fewer positions.

Specifically, Governor Parnell’s budget totals $5.6 billion in state general funds and $12.4 billion when the Permanent Fund, federal and other funds are included. The governor’s FY 2015 budget proposes 18.4 percent less in general fund spending than the current year.

“Our budget proposal does something the federal government seems incapable of: It significantly reduces spending and addresses the biggest cost driver - our state’s unfunded pension liability payments,” Governor Parnell said. “My administration is focused on living within our means, meeting our constitutional priorities, fixing what we have, and finishing what we’ve started. I will continue to work with legislators to hit a lower fiscal target.”

The Department of Revenue’s fall revenue forecast, released last week, showed a substantial decrease in revenue due to lower oil prices, declining production, and the closing out of capital credit tax liabilities from the previous oil tax system. In fact, at current oil prices, Alaska’s revenue stream is about the same under the More Alaska Production Act, and the new tax system better protects Alaskans at even lower oil prices.

Governor Parnell announced a plan to address Alaska’s single largest cost driver: unfunded pension liabilities. The governor’s budget proposal includes a recommendation to transfer $3 billion from a budget savings account into the state’s retirement trust funds. The effect is to pay down debt, resulting in lower fixed annual payments for the state.

Regarding the unfunded pension liabilities Governor Parnell said, “We need to tackle this problem now instead of pushing it off to our children and grandchildren.” 

The Alaska Democratic Party said Parnell has conceded that FY 2014 deficit will reach $1.95 billion. According to the Alaska Democratic Party, this deficit breaks a promise Parnell made last year, that the FY 2014 budget would have a $500 million surplus.  Parnell’s FY ’14 and ’15 budgets will spend $3 billion of Alaska’s savings in just two years, representing over half of the $5 billion Statutory Budgetary Reserve said the Alaska Democratic Party.

“The Oil Giveaway has left our state budget with multibillion dollar deficits, breaking Gov. Parnell’s promise to balance the budget,” said Mike Wenstrup, Chair of the Alaska Democratic Party. 

Vic Fisher, a delegate at the Alaska Constitutional Convention and one of the lead sponsors of the ‘Vote Yes—Repeal the Giveaway!’ campaign to overturn Senate Bill 21, said the Governor has a more than a $3 billion dollar draw on state savings in FY 2014 and 2015 to cover a revenue shortfall created by his reduction in oil taxes.

“The full pain of the Oil Wealth Giveaway will now be felt by thousands of Alaskans in all corners of the state, but it doesn’t have to be this way,” said Fischer.

“Alaskans must vote Yes on 1 this August to restore sanity to our budget and safeguard lasting state prosperity. The Governor’s budget has made it very clear that this bipartisan Repeal effort is the second battle for statehood,” said Fischer.

“Just a few years removed from record budget surpluses, the Governor is squandering our savings and shortchanging our children’s education in a desperate attempt to cover up a self-inflicted fiscal catastrophe,” Fischer said.

Alaska House Finance Committee Co-Chair Alan Austerman said, “At this point I’m taking a very precautionary approach to the governor’s plan to seek legislative approval to move funds from the Constitutional Budget Reserve Fund to pay down state retirement debt and replace the annual payment we’ve built into our budgets. Taking care of our commitments to our public employees is a given. The Committee will be taking a hard look at the best way to ensure we meet our obligations to public employees while also managing the rest of our obligations to the public."

Austerman said, “[Parnell's] budget bill will go through a thorough legislative review, but at this time it’s too early to offer a concrete analysis. That review will start today as the Legislative Finance Division starts their analysis and will continue with our Subcommittee process once the legislature convenes.  We'll be looking closely at our revenues and expenditures, with an eye to stretching out our savings accounts as long as possible."

The Co-Chairs of the Senate Finance Committee, Senators Pete Kelly (R-Fairbanks) and Kevin Meyer (R-Anchorage) also responded to Governor Parnell’s proposed budget/

“This is the second year of budget constraints and I appreciate the Governor’s and the Legislature’s willingness to cut back.  State government has been eating a pretty high-fat diet the last 10 years and its pants are getting pretty tight.  We have no choice to but to put it on a diet.  Though we may disagree on a few things in this budget, I like the direction the Governor is going,” saod Senator Pete Kelly.

“I’m pleased with the direction the Governor is going with the Operating Budget.  With oil production down, our revenue is down and our corresponding spending must do the same.  We believe this will change in the next year or two as more production comes online as a result of SB21.  For the Capital Budget, I am glad to see the Governor aligned with the priorities established by the Senate last year- maintain current assets and finish what we started,”  said Senator Kevin Meyer.

Senate Democrats responded to the budget announcement saying ecently revised revenue projections from the Administration’s Department of Revenue acknowledge the state faces massive income shortfalls.  Governor Parnell’s 2015 budget, coupled with the drastic reduced revenue projections from last week, paints a dire financial picture for Alaska’s economic future.

“Alaskans were pushed over a fiscal cliff by the Oil Wealth Giveaway. The huge deficits and impending budget cuts created by the giveaway are unnecessary, extreme, and bad public policy,” said Senate Democratic Caucus Leader Johnny Ellis (D-Anchorage).

“Obviously SB 21 was not the cure for Alaska's oil industry that we were promised.  We are now trapped in the worst of both worlds, declining revenue and declining production,” stated Senator Hollis French (D-Anchorage).

“If the governor wants an explanation for the explosion in state spending over the past five years, he should look no further than his own desk. He holds the veto pen and has supported the 6% year over year departmental budget increases while Alaskan children, seniors, veterans lose out.  Alaskans rightfully wonder who he is working for,” said Senator Berta Gardner (D-Anchorage).

“With budget cuts necessitated by revenue shortfalls due to the Giveaway, the Governor is putting Alaska into an economic tailspin.  He has put our schools, roads, public safety, and the Permanent Fund at risk.  For what?” stated Senator Bill Wielechowski (D-Anchorage). 

On the Web:

Draft budget bills and more detailed information on the budget
Office of Management & Budget website
omb.alaska.gov

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