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Parnell rolls out 'leaner' budget proposal

Juneau reps give contrasting reviews

Posted: December 15, 2012 - 5:40pm  |  Updated: December 16, 2012 - 1:11am

Gov. Sean Parnell unveiled his proposal for the fiscal year 2014 state budget, which weighs in at $1.1 billion “leaner” than the FY13 budget, he said, at an Anchorage Chamber of Commerce meeting Friday afternoon.

Parnell, a Republican, contended that the reduction in spending is a necessary step to respond to slowing oil production, declining oil prices and a sluggish global economy.

“Less revenue means we will spend less in 2014,” Parnell said. “Belt-tightening is nothing new to us, though it does take time to slow this locomotive of state spending.”

The operating budget proposal is broadly similar to the FY13 approved operating budget, with $5.75 billion in unrestricted general funds compared to $5.7 billion for an increase of 0.8 percent, according to a fiscal summary released along with the budget proposal.

The savings in the proposal come mainly from the capital budget. Parnell’s proposal includes 58.7 percent less spending than the FY13 approved capital budget in the FY14 proposed capital budget, $795.2 million against $1.93 billion.

The budget and spending plan is forecast to produce a modest surplus, as the combined total operating and capital budgets — which includes designated general funds, federal funds and other state funds — works out to $10.86 billion, compared to $11.37 billion in projected total revenue.

“We project a surplus of over $500 million, so we leave room for some community and legislative priorities,” said Parnell.

Including appropriations from the Permanent Fund, the total authorization to spend in Parnell’s FY14 budget proposal is $12.78 billion. That total amount is $13.18 billion for FY13.

Rep. Cathy Muñoz, R-Juneau, who is expected to be the only Southeast Alaska legislator with a seat on the House Finance Committee in the incoming Legislature, called Parnell’s proposal “a real strong budget for Juneau.”

Muñoz said she has identified about $75 million in spending for Juneau in the proposal, including $20 million in funding for the State Libraries, Archives and Museum project, or SLAM, which is set to replace the existing Alaska State Museum facility in the Willoughby District by 2016.

“That puts us within $30 million of final,” said Bob Banghart, chief curator of the Alaska State Museums. He called Parnell’s proposal “another successful introduction of SLAM project money.”

If $30 million more is appropriated to the SLAM project by the Alaska State Legislature in the upcoming session, Banghart said, then SLAM will be fully funded by summer, thus avoiding “renegotiations and cost escalations.” As it is, the project is moving forward, with a groundbreaking ceremony scheduled Jan. 16 for the construction of the new building.

Banghart praised Parnell for being “very supportive” of the SLAM project, saying the governor is “standing tall on this stuff.”

Another chunk of statewide funding that would go toward Juneau is $10 million for the Juneau Access Improvements Project, a controversial Alaska Department of Transportation and Public Facilities infrastructure project intended to construct a highway from the end of the road in Juneau up the east flank of Lynn Canal. That project has been tied up by legal issues for the past several years.

The access project aside, $18.8 million is marked for other Juneau road projects, including $5.5 million for a “separated multi-use path” along Glacier Highway to the University of Alaska Southeast and $4.2 million for lighting along Egan Drive.

Close to $1 million is in the budget proposal to remodel the Juneau Superior Court, while $2 million would go toward repairing the parking garage in the State Office Building, $9.6 million is marked for the state’s Douglas Island Building and $775,000 is set aside for deferred maintenance on the Lemon Creek Correctional Center.

Parnell said funding for the Alaska Department of Public Safety provides for three new state prosecutors in Juneau, Fairbanks and Bethel to prosecute child sex abuse cases, Parnell said.

“In Alaska, crimes against children will be prosecuted to the greatest extent of the law,” Parnell said. “There’s just no way around it. We cannot cut corners.”

Parnell also highlighted several line-items for Alaska gas line development, identification of “corridors” for logging and mining, and Arctic region mapping.

“As you can tell, we put a heavy emphasis on resources and accessing them,” said Parnell. “They’re the solid economic building blocks that Alaskans require, in good times and bad.”

Overall, Muñoz is pleased with the budget proposal, she said.

“I think it’s very important that we put together a balanced budget that considers less revenue. We have considerably less production and oil revenue than we did … even two or three years ago,” Muñoz said. “It’s a budget that’s conservative, but it’s based on reality.”

But Muñoz said she found one item in the budget proposal of “concern” to her.

The budget proposal does not include an adjustment to the Base Student Allocation, a major part of the formula used to calculate how much money school districts receive from the state.

“The districts around the state are struggling … and they are having a very difficult time balancing their budgets,” said Muñoz, predicting there would be “pressure” on the Legislature in the upcoming session to adjust the BSA.

Parnell defended his budget proposal on education during a press conference in Anchorage after his appearance at the Chamber meeting.

“It’s true that there has been no increase in the Base Student Allocation of the formula, but it’s not true that we have not increased education funding across that time,” Parnell said. “This budget, just on the K-12 formula side, in the formula itself, increases it by $13 million.”

For Muñoz’ part, she said, “I do believe … that it’s time for a BSA adjustment.”

House Minority Leader Beth Kerttula, D-Juneau, said she thinks the BSA should be adjusted as well.

But Kerttula, while expressing disappointment with certain elements of the draft budget, questioned the very premise of Parnell’s proposed spending cuts.

“Part of the reason why it’s lower is that the Department of Revenue has a new forecast out, and it’s not just a new forecast, it’s a whole new methodology for looking at oil forecasting,” Kerttula said.

In its fall 2012 revenue forecast, Parnell’s Office of Management and Budget extrapolated actual production data in order to calculate their oil production forecast. The forecast predicts a sharp drop in unrestricted general revenue, the vast majority of which comes from oil proceeds, from about $9.5 billion in FY12 to $7.57 billion in FY13 and $7 billion in FY14.

Kerttula said she thinks the fall forecast, which Parnell said influenced how the budget was crafted, is “off.” She also predicted the Legislature will not be satisfied with Parnell’s budget as presented.

“On the whole, it’s not a visionary budget,” said Kerttula. “And I think that’s going to mean that it’s going to be a lot of discussion in the 90-day session about what to do with it, because we’re at a starting point that may not make sense.”

At the Chamber meeting, Parnell also said he has asked legislative leaders to work with him on a spending limit for the state government.

“A self-imposed, reasonable limit is the key to successful and more sustainable spending,” Parnell asserted. “It imposes a greater accountability and allows us to emphasize our constitutional priorities.”

• Contact reporter Mark D. Miller at 523-2279 or at mark.d.miller@juneauempire.com.

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