The state's top budget officer presented Gov. Sean Parnell's budget proposal to the Juneau Chamber of Commerce Tuesday.
Included in the $10 billion-plus budget are tens of millions of dollars to be spent in Juneau, said Karen Rehfeld, director of Parnell's Office of Management and Budget.
Rehfeld told the chamber that Parnell's budget was focused on improving the state's economy, but that much of the spending and budget increases are mandatory.
"The governor's number one priority is to position Alaska's economy for growth and our families for opportunity," Rehfeld said.
The budget Parnell proposed Dec. 14 for fiscal year 2011 calls for $10.46 billion in spending, much of which is for constitutionally mandated services, she said.
Medicaid is a primary example of that, she said, because as more people become eligible the spending goes up.
That's given the state a total budget which is 3 percent higher than the current year, but where general fund spending is projected to increase 8.6 percent, Rehfeld said.
The budget fully funds K-12 education, according the state's funding formula, an expenditure which comes to 11 percent of the state budget.
Medicaid, which is partially reimbursed by the federal government, is another 15 percent of the budget. The capital budget, which includes large construction projects, makes up another 14 percent of the budget.
Rehfeld said that another of Parnell's proposals is to spend money repairing deteriorating buildings and other properties.
"We have a lot of work to do to take care of the state's assets," she said.
The budget also contributes $73 million toward the state's unfunded liability, the amount that the state expects to have to pay for retiree costs that it doesn't already have in savings.
Over the last year state income fluctuated wildly, with oil prices and revenue to the state first soaring and then plunging.
"It has made budgeting particularly difficult," Rehfeld said.
Since then oil prices have been rising to nearly $85 a barrel for Alaska North Slope crude, putting an end to the fluctuation.
"It was just hard all the way around, from communities to the Legislature to the executive branch," she said.
At the current prices, Rehfeld said Parnell's proposal will enable the state to balance its budget, fund required services, make a few improvements and set aside significant savings for the future.
"That puts Alaska in an enviable position when we look at what some other states are going through," Rehfeld said.
Alaska's savings, she said, are very important because oil production is declining and the state's savings will be needed to continue providing services.
"We know we are going to at some point have to rely on reserves," she said, explaining that is why Parnell is reluctant to expand state government.
"We're holding the line on state agency growth," she said.
A constitutional amendment proposed by Sen. Hollis French and Rep. Harry Crawford, both Anchorage Democrats who are running for higher office, would enshrine the popular Permanent Fund Dividend in the state constitution.
"When we talk about giving big tax breaks to the oil companies, the unspoken corollary is, where are we going to get the money from? The Permanent Fund." Crawford said Wednesday of the push.
Such change would make the dividend more secure and less likely to be tapped for governmental operations, but would reduce budgeting flexibility, Rehfeld said.
"As a budget director, I'd like to say its much better to have flexibility down the road to do what you need to do," she said.
Contact reporter Pat Forgey at 523-2250 or firstname.lastname@example.org.