$4.7 billion operating, capital budget announced; 1.5% payroll deduction tax proposedBy MARY KAUFFMAN
December 16, 2017
The $4.7 billion proposal, announced in Anchorage, includes the state's operating budget, capital budget; economic recovery; and budget reform. Just one year ago, a $4.2 billion operating budget and a $115 million capital budget were announced on December 15th. The governor's budget also includes a $34 million increase in public safety spending to invest in a proposed Public Safety Action Plan which calls for more "resources" to address the rise in Alaska's crime and the opioid epidemic. “We have cut spending to increase funding for public safety,” said Governor Bill Walker. New spending will include a statewide drug prosecutor, a statewide trooper investigator, two prosecutors in Anchorage, expansion of substance abuse treatment, a prosecutor in Bethel, a trooper investigator in Bethel and a prosecutor in Kotzebue. The proposed buget also includes an "Alaska Economic Recover Plan" to be funded in part by the proposed 1.5% payroll decuction tax that is to sunset in 2021. Proposed and funded by this payroll deduction tax is the economic investment of $1.4 billion over three years to put more than 1,000 Alaskans to work. The payroll deduction tax is also designed to provide $800 million towards the state’s $1.8 billion deferred maintenance backlog. The budget also includes proposals to pay off outstanding oil and gas exploration tax credits in fiscal year 2019, and grant the Alaska Gasline Development Corporation authority to accept funds from sources other than the State of Alaska. Addressing FY2019's proposed capital budget of $150 million in unrestricted general funds, according to the Alaska Office of Management and Budget, this is very minimal, covering federal match for transportation, rural and municipal water and sewer programs, housing, and required technology upgrades. FY2019’s capital budget is 39 percent lower than the FY2018’s state capital spend that included unrestricted general fund and re-appropriations (use of unrestricted general funds remaining in old projects re-directed to new priorities) totaling $255 million. Regarding accountability, Governor Walker said, "We should pink-slip ourselves before we hand out pink slips to teachers and troopers.” To restore accountability, if the Governor does not publish the budget by December 15th, he will forfeit per diem and have pay withheld for each overdue day. Similarly, if the legislature does not pass the budget within the 90-day deadline, legislators will forfeit per-diem and have pay withheld for each overdue day until budget passage. The Alaska Office of Management & Budget will also work with Legislative Budget and Audit to change the way the budget is presented, to create greater transparency. The Alaska Budget Transparency Report is a new report that will be produced to keep Alaskans informed and provide a more accurate gauge of the true “footprint” of government. This report is to be designed to help the public in understanding the actual trend of state spending over time. Senator Berta Gardner (D-Anchorage) said in a prepared statement Friday, “I applaud his efforts and innovative ideas including biennial budgets to increase certainty in state services, using per-diem as a tool to encourage the legislature to pass budgets in a timely manner, and creating a small, temporary payroll tax to put people back to work on deferred maintenance projects." Gardner said, “However, I doubt Alaskans support taxing only working people for necessary state infrastructure while prioritizing the use of dwindling state funds to pay credits to oil and gas companies." Senator Gardner said, “I am heartened to see the Governor's budget acknowledge Alaskans do not feel safe in their homes and communities. The Senate Democrats have been advocating for increased public safety and appreciate that the Governor is adding more troopers, drug offense prosecutors, criminal investigators, and adding grants to address substance abuse treatment. These are all good steps to increase our security and improve lives." “We absolutely must focus on creating confidence in Alaska and predictability for families, employees, teachers, bankers, and all Alaskans. I look forward to working with my colleagues to make this a budget that reflects Alaska’s conscience.” said Gardner. In a news release, the members of the Alaska House Majority Coalition said they believe the Governor’s budget proposal aligns with Coalition priorities because it fully funds public education and responds to the uptick in crime by providing additional funding for some of the state agencies that deal with public safety in Alaska. The Governor’s budget proposal will be used as the starting point for the budget deliberations of the Alaska House Finance Committee, under the direction of Co-Chair Rep. Paul Seaton (R-Homer). “We face some difficult decisions in the coming months to protect the jobs of thousands of Alaskans, ensure we get out of this lingering recession, and put Alaska back on firm fiscal ground. I am especially pleased to see that the Governor is proposing to fully fund public education. As Alaskans we must resist the urge to slash and burn our decades-long investment in great schools and excellent teachers to fill a budget gap caused by low oil prices and legislative inaction,” said House Finance Committee Co-Chair Rep. Paul Seaton (R-Homer). Rep. Seaton is in charge of guiding the proposed FY 2019 operating budget through the legislative process in the Alaska House of Representatives. The other Finance Committee Co-Chair, Rep. Neal Foster (D-Nome), will lead the proposed FY 2019 capital budget through the process. The Governor’s proposed FY 2019 capital budget is a very modest $150 million that will cover the state’s match for anticipated federal funding for roads and water and sewer projects. “The bare bones capital budget put out by the Governor is what I had anticipated. There simply is not sufficient revenue to address our state’s infrastructure needs. That said, we also cannot risk the damage to our economy by foregoing matching funds from the federal government. The details of the capital budget and his economic stimulus plan will require due consideration and I am committed to working with our members and Senate counterparts on these proposals,” said Rep. Foster. The Alaska Department of Revenue released the Fall 2017 Revenue Sources Book, which estimates that unrestricted General Fund revenues will total $2.1 billion this fiscal year and $2 billion in FY 2019. The revenue forecast is based on a projected oil price of $56 per barrel this year and $57 per barrel in FY 2019. The limited payroll deduction tax of 1.5 percent is designed to sunset after three years and be limited to paying for deferred maintenance projects according to the Alaska House Majority Coalition. The coalition will be reviewing this proposal when the Second Session of the 30th Alaska State Legislature gets underway on January 16, 2018. According to the budget documents, there are 2,800 fewer state employees this year compared to three years ago. State employment today is lower than it was in 2002 (comparing month-to-month to avoid seasonal changes). Additionally, efficiency measures such as Shared Services and the Office of Information Technology, Alaska’s strategic integration initiatives, are expected to reduce administrative staff by another 200 positions over the next several years. These eliminations will be managed through attrition as state government strives to run as efficiently and effectively as possible. When fewer resources are required for back-office functions, more is available to directly serve Alaskans. According to budget documents, the FY2019 budget continues to reduce the number of positions by 217 compared to FY2018. There are 2,127 fewer than in the FY2015 budget. This is the net change after adding 20 positions for public safety, 10 positions at the Permanent Fund Corporation to bring additional asset management in house, and 10 guardians in the Office of Public Advocacy to protect vulnerable seniors. According to the Alaska Office of Management & Budget, this budget maintains the level of service that Alaskans value most while making strategic investments in public safety and criminal justice. The budget, along with the Governor’s Alaska Economic Recovery Act, will combat the recession, grow the economy and get Alaska back to work. Along with these high-priority initiatives, the budget provides Alaskans with a larger divided that is expected to grow in the years ahead. Administration documents state that targeted reductions aimed at making state government more efficient continue to be made as the state moves towards a sustainable budget that provides Alaskans with the highest value for their tax dollars. Also proposed is a biennial budget which is said would increase efficiency and reduce uncertainty by moving to a two-year budget system, a practice currently followed in 19 other states.
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