Oil surpluses bring changes to Legislature

With state coffers flush with oil money, there's something of a role reversal going on in the Capitol.

Some Republicans who campaign on being tight with state dollars are proposing big new spending plans, while some Democrats are questioning the spending and proposing aggressive savings plans instead.

House Democratic Leader Rep. Beth Kerttula, D-Juneau, said she was "shocked, shocked," to see big Republican spending proposals. She said it was Republicans in charge - in the House, Senate and governor's office - when the spending grew substantially in recent years.

One of those pushing a big spending plan this year, Sen. Tom Wagoner, R-Kenai, said his plan to spend as much as $200 million on energy "rebates" might actually help save some of the state's big surplus.

"I was looking for a way to take some money out of this wad that may go to grow government, and give it back to the people," he said.

Some Republicans admit that other party members have spent too much money, but say they're trying to stop it.

Gov. Sarah Palin said former Gov. Frank Murkowski, a fellow Republican, grew the state government at an unsustainable rate. Prior to the Palin administration, Alaskans had seen growth in government spending averaging 14 percent a year, Palin said in announcing her budget for next year, but said she was committed to finding a way to slow the growth, she said.

"There's just been huge increases there," she said.

Palin has since wound up clashing with legislators, including some Democrats who say she's the one spending too much.

Democratic Sen. Lyman Hoffman, co-chairman of the Senate Finance Committee, said the Legislature's analysis of Palin's budget proposal showed it would continue Murkowski's spending increases, if not reined in by the Legislature.

"We would have grown government by 30 percent in two years, and that's unacceptable," Hoffman said.

At the start of the session, Rep. Mike Doogan, D-Anchorage, proposed legislation to put the entire surplus into the Constitutional Budget Reserve, which is considered partially protected from spending.

"Right now, I'm in favor of putting the entire surplus - everything but the operating and capital budgets - into the CBR. That'd be right around $3 billion, a tidy little number," he said early in the session.

So far, it looks like Doogan will find saving the surplus in the budget reserve difficult to do.

Those not trying to spend the surplus, are looking for less secure savings methods so the money will be easily available.

Big money

Some of the boldest spending proposals include:

• Oil refund - Sen. Charlie Huggins, R-Wasilla, has proposed giving an estimated $800 million to the state's oil producers by repealing the retroactivity clause of the new oil tax law passed last November.

• Susitna hydroelectric dam - A state effort to develop the Susitna River's huge hydroelectic potential collapsed 20 years ago, when it was estimated to cost $5 billion. Rep. Craig Johnson, R-Anchorage, has proposed spending $1 million to begin studying the project again. Sen. Gary Wilken, R-Fairbanks, said Alaska should set aside $3 billion to back bonds for the project.

• Education funding - Palin recommended boosting per-student funding by $200 per year. Some legislators, including Hoffman of Bethel, say that's too much and are pushing for a $100-per-student increase instead.

• Energy rebate - Rep. Bill Thomas, R-Haines, has talked of giving most Alaskans $500 extra in their Alaska Permanent Fund dividends, estimated to cost about $360 million, to help them deal with the high cost of heating their homes and share in the state's oil bounty. Sens. Wagoner and Gene Therriault, R-North Pole, are proposing a smaller bonus, one which would only cost the state as much as $200 million.

Therriault, leader of the Senate Republican Minority, said the state was benefiting hugely from high oil prices.

"That's great for the state treasury, but it really hits our consumers in the pocketbook," Therriault said.

• Capital move - Rep. Kevin Meyer, R-Anchorage, has proposed moving the Legislature to Anchorage, something critics fear would mean the entire capital would eventually follow. The Legislative Affairs Agency says a legislative meeting hall in Anchorage is estimated to cost $52 million, plus moving and other costs, though Meyer disputes those estimates.

Republicans aren't the only ones proposing more spending this year, and an education plan that would provide widespread education spending increases, though only a small amount for per-student funding for districts, has widespread support.

Fairbanks Democratic Rep. Scott Kawasaki thinks Alaska isn't doing enough to support early education and prepare children for success in school.

"I think it's a travesty," he said at a press conference with other Democratic leaders. Kawasaki's solution: Bump up the $50 million early education program by $1 million.

Palin vs. legislators on education

The bipartisan coalition that controls the Senate and includes Hoffman is proposing lower per-student spending than Palin said she favors, but coalition members say they're still proposing more spending.

Prominent Democratic Sen. Johnny Ellis of Anchorage, another member of the coalition, said that the $100-per-student increase was part of a "three-legged deal" between different parties within education and various factions among lawmakers on school funding, revenue sharing and retirement costs, and that changing the agreement could cause the deal to collapse.

"We could lose it all," Ellis told education leaders visiting the Capitol recently, urging them to not fight too hard for the higher number.

"Let's all be reasonable and seize the moment," he said.

The Palin administration sees the deal differently and doesn't think the agreement was quite so delicate, said Eddy Jeans, director of the Department of Education's School Finance and Facilities Section.

"To portray it as delicate, as it is being portrayed, really surprises me," he said, supporting the increase of $200 per student.

Jeans said he sat though the summer's lengthy negotiations between House and Senate leaders in which they crafted the school funding package and they didn't preclude spending more.

"We heard over and over, this a proposal. This is a starting point," he said. That's changed now, he said. "Right out of the chute everybody's being told how delicate this package is," he said.

The spending proposals aren't just raising eyebrows in Alaska. Newsweek magazine recently took note of Thomas' energy rebate proposal.

Alaska Sen. Ted Stevens has warned that growing national recognition of Alaska's wealth could make it increasingly difficult to win funding for important state programs in Congress.

"Many take note of the billions of dollars in our permanent fund," he told the Legislature last year. Stevens' office did not return recent phone calls regarding the political effect in Congress of payments, such as those proposed by Thomas and Wagoner.

• Contact reporter Pat Forgey at 586-4816 or patrick.forgey@juneauempire.com.